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Location: Central Bank of Bahrain Volume 6—Capital Markets > Part A > Market Standards > MIE — Market Surveillance, Investigation & Enforcement
  • MIE — Market Surveillance, Investigation & Enforcement

    • MIE-A Introduction

      • MIE-A.1 Purpose

        • Executive Summary

          • MIE-A.1.1

            The CBB's statutory regulatory objectives include maintaining and promoting the fairness, efficiency, competitiveness, transparency and orderliness of the securitiesG markets in the Kingdom of Bahrain. The CBB believes that investor confidence in the fairness of markets enhances liquidity and efficiency of the markets and for this purpose, it is essential that the laws and standards governing the markets are rigorously and credibly enforced. In this respect, the CBB is making continuous efforts to ensure that the rules are strongly and fairly enforced, with proscribed behaviour clearly and unambiguously defined.

        • The CBB's Enforcement Responsibilities

          • MIE-A.1.2

            The CBB's key enforcement-related aims are to protect investors and maintain market integrity and confidence. The CBB's regulatory framework needs to address stray cases of non-compliance to ensure that such contraventions of relevant laws, rules and regulations:

            •  do not cause potential loss to the investing public;
            •  do not disrupt the financial sector in general and the capital market in particular;
            •  do not adversely impact the Kingdom's credibility as an international financial centre;
            •  do not encourage non-compliance or contravention of rules; and
            •  do not unfairly disadvantage the market participants who comply with all laws, rules and regulations.

          • MIE-A.1.3

            The Market Surveillance, Investigation and Enforcement Module (MIE Module) sets out the CBB's regulatory framework governing the mechanisms and proceedings relating to detection and investigationG of breaches of laws, rules and regulations and the appropriate enforcement actions. The process of enforcing the laws and regulations generally involves three main steps:

            •  Market Surveillance: identifying that a potential breach of the relevant laws or regulations has taken place and identification of those responsible for the potential breach;
            •  Investigation: once there is a suspected case of a breach of relevant laws or standards, the CBB may conduct investigationsG or enquiries to find out what has happened, and whether there is any evidence of a breach; and
            •  Enforcement: taking necessary steps to protect the public interest and if appropriate, to punish those responsible for the breach.

        • The CBB's Approach to Enforcement

          • MIE-A.1.4

            The CBB's approach is to provide a strong and facilitative regulatory framework along with an effective enforcement of regulatory requirements. While the CBB favours an open and pragmatic approach to supervision within the boundaries set by the law and the CBB's regulations, it ensures effective enforcement of regulatory requirements.

          • MIE-A.1.5

            The CBB seeks to clearly lay down the rules that will be applied transparently and consistently to ensure that the bona fide investors and market participants are not inconvenienced in their normal course of business, by enabling them to take all reasonable precautions and exercise due diligence to avoid their engagement in prohibited market conducts.

          • MIE-A.1.6

            The CBB is guided by the following principles of regulation and enforcement:

            •  Firmness — firm and appropriate action against those who harm investors or damage market integrity, regardless of their position or status.
            •  Fairness — treat everyone fairly. The requirements of procedural fairness and natural justice are important in CBB's decision-making processes.
            •  Consistency — try to ensure that consistency is maintained in decisions or actions whilst having regard to the specific circumstances of each case.
            •  Proportionality — try to ensure that decisions or actions are proportionate, or balanced. For example, take tough action against serious misconduct but more lenient action against less serious conduct.

          • MIE-A.1.7

            The CBB's enforcement actions are aimed at achieving the following:

            •  Prevention — it is better to stop improper conduct before it happens. To achieve this, the CBB encourages market participants to foster a culture of compliance. The investing public can also help by learning how to look after their own rights and interests.
            •  Remedying what has happened — if a breach has already occurred, the CBB will take appropriate steps in terms of applicable laws, rules and regulations to remedy it and look at each situation in light of its particular circumstances and consider what might be appropriate courses of action. It is important to note that, although the CBB is required to act in the public interest, the CBB cannot seek compensation for those who have suffered loss as a result of a breach, or directly assist them in their attempts to seek compensation through the courts.
            •  Punishing wrongdoers and deterring others — in general, punishment is usually appropriate for those who engage in wrongdoing. Punishment serves a number of purposes. Firstly, it is an effective tool to deter wrongdoers from engaging in further wrongdoing. Punishment may also deter others from engaging in wrongdoing. Thus, it has a deterrent effect that minimises misconduct. To maximise the deterrent effect, the CBB generally publicises its enforcement sanctions wherever appropriate. Note that the CBB cannot represent or bind other authorities or regulators that may have an interest in the matter.
            •  Effectiveness of action — the CBB must set priorities and make the best use of the limited resources available. Therefore, the costs and benefits of any action that the CBB proposes to take must be considered.
            •  Cooperation with other regulators — the CBB cooperates with other domestic and overseas regulators in situations where it may be more appropriate for a regulatory body other than the CBB to take action.
            •  A balancing act — each of the CBB's enforcement actions involves a careful balancing of a number of complex issues. These issues will also vary from case-to-case. In balancing them and making a decision, the CBB will always endeavour to act firmly, fairly and impartially, keeping in mind at all times the CBB's principles of regulations and aims described under paragraphs MIE-A.1.6 and MIE-A.1.7.

        • Legal Basis

          • MIE-A.1.8

            Article (38) (a) mandates the Governor of the CBB to issue necessary directives to ensure the implementation of the CBB Law and regulations and the achievement of the objectives of the CBB. Article (38) (b) provides the CBB with the power to issue necessary directives to ensure the implementation of CBB laws and regulations that aim to formulate the understanding and implementation of the CBB Law and regulations.

          • MIE-A.1.9

            Article 96 of the CBB Law states that: "Subject to the rules and laws of evidence and electronic transactions, any computer data, electronic files, recorded telephone calls, telex and facsimile correspondence may be used as evidence in disputes relating to securitiesG ".

          • MIE-A.1.10

            Chapter 1 of Part 5 of the CBB Law (Articles 97 to 105) defines insiders, inside information and market information, prohibits abuse of inside information, and provides defences. Particularly, Article 99 provides the CBB with the power to issue regulations concerning the necessary procedures and controls of publishing market information. Article 100 states that: "A personG who is in possession of inside information, as an insider shall not use such information to:

            (1) Deal in any securitiesG to which that information relates.
            (2) Encourage any personG to deal in any securitiesG to which that information relates.
            (3) Disclose inside information to any other personG , otherwise than in the proper performance of the functions of his employment, office or profession.
            (4) Violate the rules governing the publishing of market information."

          • MIE-A.1.11

            Chapter 2 (Articles 106 and 107) deals with Violation of Market Dealings. Article 106 states that: "In the application of this law a personG is guilty of market manipulation if he:

            (1) Is engaged, or encourages others to engage, in any conduct that may give a false or misleading impression as to the supply of or demand for, or the price or value of any securitiesG .
            (2) Is engaged, or encourages others, to engage in any conduct that may give an unrealistic picture of the market regarding the volume and prices of any securitiesG ."

          • MIE-A.1.12

            Part 7 of the CBB Law (Articles 111-115) provides the CBB with the power to obtain information and reports, conduct inspectionsG and to participate in judicial investigationsG with the Ministry of Justice and Islamic Affairs.

          • MIE-A.1.13

            Part 8 of the CBB Law (Articles 116-120) provides for restrictions on disclosure of confidential information.

          • MIE-A.1.14

            Part 9 of the CBB Law (Articles 121-132) provides for the appointment of investigatorsG , obtaining information, documents and explanations in possession of a third party, entering and inspecting specific premises to obtain relevant information, documents and explanations, retaining the information, penalties and administrative proceedings, and assistance in investigationsG by overseas authorities.

          • MIE-A.1.15

            Part 11 of the CBB Law (Articles 160-172) provides for penalties for various contraventions and violations of the provisions of the CBB Law.

          • MIE-A.1.16

            Article 167 specifically provides penalty for the offence of abuse of inside information and states that "Without prejudice to any greater penalty prescribed in the Penal Code or under any law, a personG who contravenes Article 100 of this Law, while he is fully aware, shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars (10,000), or either penalty".

          • MIE-A.1.17

            Article 168 specifically provides penalty for the offence of market manipulation and states that: "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a personG who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty".

          • MIE-A.1.18

            Article (175) of the CBB Law provides that neither the CBB nor any of its employees shall be responsible for any procedure, action or forbearance that resulted in inflicting damages to others if such procedure, action or forbearance was performed in good faith in the course of execution of the duties and responsibilities of the CBB and within its authorities as specified in the Law and the regulations and by-laws issued in implementing it.

      • MIE-A.2 Module History

        • Evolution of Module

          • MIE-A.2.1

            This Module was first issued in October 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

          • MIE-A.2.2

            Article 13 of the Bahrain Stock Exchange Law (BSE Law) provides for an arbitration mechanism and Chapter 7 (Articles 56 to 72) of the BSE Internal Regulation provides for a procedure for reference to an Arbitration Committee and settlement of disputes relating to transactions done on the BSE.

          • MIE-A.2.3

            Article 14 of the BSE Law requires the BSE to have a Disciplinary Board for deciding on violations of the provisions of the BSE Law, regulations and resolutions regulating the BSE, as well as any violation affecting the proper conduct of business and order in the BSE.

          • MIE-A.2.4

            Article 15 of the BSE Law provides for an appeal to the Disciplinary Board of Appeal against the decisions of the Disciplinary Board.

          • MIE-A.2.5

            Chapter 8 (Articles 73 to 91) of the BSE Internal Regulation specifies the procedures to be followed by the Disciplinary Board; registering complaints against members and listed companies of the BSE, investigationsG to be conducted by the Control and Investigation Unit of the BSE, decision-making process of the Disciplinary Board, and notification of the decision.

        • Superseded Requirements

          • MIE-A.2.6

            This Module supersedes the following provisions contained in circulars or other regulatory instruments:

            Circular/ other references Provision Subject
                 
                 
                 
                 
                 
                 
                 

      • MIE-A.3 Interaction with Other Modules

        • MIE-A.3.1

          All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.

      • MIE-A.4 Division of Responsibilities

        • MIE-A.4.1

          While dealing with cases relating to contravention of the CBB Law, rules and regulations, or other applicable laws, rules and regulations, a clear division of responsibilities between the CBB as the securitiesG regulator and the licensed exchangesG or the licensed market operatorsG as a self-regulatory organization (SROG ) is required:

          (a) To achieve greater efficiency and transparency in the enforcement of the laws, rules and regulations;
          (b) To maximise the regulatory effectiveness;
          (c) To permit flexibility to the licensed exchangesG or the licensed market operatorsG in their functioning;
          (d) To minimise the regulatory cost; and
          (e) To maintain market integrity and investor confidence.

        • MIE-A.4.2

          As a regulator, CBB's role is as follows:

          (a) Regulatory supervision, including the licensing, supervision, inspectionG , investigationG and enforcement and regulatory oversight on the licensed exchangesG , licensed market operatorsG , licensed clearing housesG and depositoriesG and other SROsG .
          (b) Maintaining and promoting fairness, efficiency and transparency within the capital marketG ;
          (c) Acting as an enforcement agency with powers to investigate and take administrative, civil or criminal actions as it may deem appropriate;
          (d) Approving the rules, by-laws and business rules of the licensed exchangesG or the licensed market operatorsG , licensed clearing housesG or depositoriesG , whereby any change in the rules, by-laws and regulations of the SROsG would need prior approval of the CBB; and
          (e) Ensuring that the licensed exchangesG and licensed market operatorsG , licensed clearing housesG and depositoriesG , and other capital market service providersG and members of SROsG have appropriate systems and procedures for detection of unlawful transactions and contraventions of the CBB Law, rules and regulations and report to the CBB at the earliest stage possible.

        • MIE-A.4.3

          The licensed exchangeG or the licensed market operatorG or licensed clearing houseG or central depositoryG established as an SROG must comply with the requirements laid down under the CBB Law, rules and regulations, this Module and the other applicable laws and regulations.

        • MIE-A.4.4

          As an SROG , the main objective of the exchange or the operator or the clearing house would be to:

          (a) Actively perform market surveillance as a front-line regulator;
          (b) Promote fairness and investor protection;
          (c) Promote fair access to marketG facilities and information;
          (d) Promote the provision of timely and accessible marketG information;
          (e) Promote the efficient regulation of its members;
          (f) Maintain fairness of price discovery mechanism and ensure prices are determined by the genuine forces of supply and demand;
          (g) Monitor the trading and market on a continuous basis;
          (h) Report any irregular transactions or irregular market behaviour or suspected cases of market abuse or market manipulation, or any contravention of the CBB Law, rules and regulations;
          (i) Identify irregular transactions and take appropriate enforcement actions;
          (j) Take disciplinary action for contraventions by market participants and listed companies through an SROG 's Disciplinary Action Committee(s).

        • MIE-A.4.5

          Apart from the obligations of the licensed exchangesG and market operators under the Markets & Exchanges (MAE) Module, and the obligations of the licensed clearing housesG and depositoriesG under the Clearing, Settlement and Central Depository (CSD) Module, these SROsG shall:

          (a) Provide such assistance to the CBB in the manner required by the CBB for the purposes of the CBB's market surveillance, investigationG and enforcement functions;
          (b) Provide such reports as the CBB may require for the purposes of this Module;
          (c) Conduct inspectionsG or investigationsG as the CBB may require the SROG to do and submit its Inspection and Investigation Report, along with the facts, documents and evidence supporting the outcome of such inspectionG or investigationG ;
          (d) Implement the decisions or measures or actions decided by the CBB, both at the market level and at the level of the individual security or issuer, or member or market participant level in the manner required by the CBB;
          (e) Promptly implement such enforcement actions determined by the CBB against the members and issuers, through the SROsG Disciplinary Action Committees.

        • Role of Other Capital Market Service Providers

          • MIE-A.4.6

            All capital market service providersG in general, and members of the SROsG in particular, must have the necessary infrastructure and systems to identify and report any irregular transactions or suspected cases of market abuse or market manipulation, or suspected cases of contravention of the CBB Law, rules and regulations, or any other relevant laws, rules and regulations, which they come across in the normal course of business, to the CBB in the format given in paragraph MIE-A.4.7. This reporting shall be done immediately on becoming aware of such incidences or contraventions, or suspected cases.

        • Reporting of Irregular Transactions

          • MIE-A.4.7

            PersonsG subject to the obligations to report irregular transactions to the CMSDG shall report in the following standard format:

            Description of the transaction(s)
            Details of the securities, including the code of the security (ISIN Number); the market(s) concerned; the original order's entry date/time, price and size; the times and sizes of the transaction(s); the type and characteristics of the order, etc.
            Reasons for Suspicion
            Reasons for suspecting that the transaction(s) might constitute insider dealing/market abuse/ market manipulation
            Identities of persons carrying out transaction(s)
            Names, addresses, telephone number, location, account number, client Identification code used by the firm, etc.
            Identities of any other persons known to be involved in the transaction(s)
            Names, addresses, telephone number, location, relation to person carrying out transaction, position held, role played, etc.
            Capacity in which the person performing the transaction(s) acts
            e.g. broker, underwriter, agent, investment/fund manager, auditor, insider.
            The ownership of securities before and after the execution of the transaction (of the concerned parties carrying out the transactions).
            Any information which may be of significance (along with a list of any accompanying documents/evidence)
            Details of the person making notification
            Name of person, name of firm, position held within firm, contact details, etc.
            Signed ........... (person making report)

            Dated ........... (date of report)

          • MIE-A.4.8

            Where the information specified to be reported is not available at the time of reporting, the report shall include at least the reasons why the reporting personsG suspect that the transactions might constitute contravention of the CBB Law, rules and regulations. All remaining information shall be provided to the CMSDG as soon as it becomes available.

            PersonsG making reports therefore, do not need to have all the required information before reporting to the CMSDG . If the case is one which (the personsG subject to the reporting obligation consider) needs to be brought to the attention of the CMSDG urgently, then the personG (s) concerned shall make the first contact quickly. This can be done by telephone if appropriate, giving the basic details and reasons for suspicion, followed by written confirmation. The other information may be supplied subsequently.

        • Records of Telephone Conversations and Electronic Communications

          • MIE-A.4.9

            In addition to meeting the book-keeping and record-keeping requirements as per the applicable laws, rules and regulations, all capital market service providersG and members of SROsG must maintain records of telephone conversations and electronic communications, including facsimile, email and other instant messaging devices relating to their activities in the securitiesG market and particularly the following activities:

            (a) Receiving client orders;
            (b) Executing client orders;
            (c) Arranging for client orders to be executed;
            (d) Carrying out transactions on behalf of the capital market service providerG /member of an SROG , or another personG in the capital market service providerG /member of an SROG group, and which are part of the capital market service provider'sG /member of an SROG 's trading activities, or the trading activities of another personG in the capital market service providerG /member of an SROG group;
            (e) Executing orders that result from decisions by the capital market service providerG /member of an SROG to deal on behalf of its client;
            (f) Placing orders with other entities for execution that result from decisions by the capital market service providerG /member of an SROG to deal on behalf of its client;

            that are required to be maintained by the capital market service providerG /member of an SROG as per the CBB rules, regulations and directives.

          • MIE-A.4.10

            All capital market service providersG /members of an SROG must take reasonable steps to retain and protect the records referred to in rule MIE-A.4.9:

            (a) Apart from complying with various requirements relating to record keeping, as per CBB Law, rules and regulations and other applicable laws, rules and regulations, the recordings of telephone conversations shall be retained for a period of at least twelve months from the date the record was created;
            (b) For a period of at least twelve months from the date the record was created;
            (c) In a medium that allows the storage of the information in a way accessible for future reference by the CBB, and so that the following conditions are met:
            (i) The CBB must be able to access the records readily and take copies;
            (ii) It must be possible for any corrections or other amendments, and the contents of the records prior to such corrections and amendments to be easily ascertained;
            (iii) It must not be possible for the records to be otherwise manipulated or altered.

    • MIE-B Scope of Application

      • MIE-B.1 Scope of Application

        • Scope

          • MIE-B.1.1

            This Module shall apply to:

            (a) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of any personG (s) within Bahrain in relation to securitiesG offered, issued or listed in Bahrain or elsewhere;
            (b) Any conduct or behaviour occurring outside Bahrain or any transaction or expected transaction done by or on behalf of any personG (s) outside Bahrain in relation to securitiesG offered, listed or issued in Bahrain;
            (c) Any conduct or behaviour occurring within Bahrain; or any transaction or expected transaction done by or on behalf of any personG (s) within Bahrain in relation to:
            (i) Futures contracts, whether traded on a futures market in Bahrain or elsewhere; or
            (ii) Leveraged foreign exchange trading contracts, whether in Bahrain or elsewhere; and
            (d) Any conduct or behaviour occurring outside Bahrain; or any transaction or expected transaction done by or on behalf of any personG (s) outside Bahrain in relation to:
            (i) Futures contracts traded on a futures market in Bahrain;
            (ii) Leveraged foreign exchange trading contracts in Bahrain; or
            (iii) Leveraged foreign exchange trading contracts that are accessible from Bahrain.

          • MIE-B.1.2

            This Module contains the CBB's Directive relating to Market Surveillance, Investigation and Enforcement and is issued under the powers available to the CBB under Article 38 of the CBB Law, read with the abovementioned provisions of the CBB Law. The Directive under this Module is applicable to all market participants and relevant personsG , including but not limited to issuers of securitiesG or any personG acting on their behalf, licensed exchanges, licensed market operators, licensed clearing houses, depositories, investment firms, collective investment undertakings, business trusts, listed companies, any personG acting for or on behalf of listed companies, shareholders of listed companies, share registrars, lead managers, underwriters, professional advisors, listing agents, auditors, financial analysts, credit rating agencies and any other personG who engages or encourages others to engage in any acts of commission or omission covered by the scope of this Module, irrespective of whether such personG is a market participant or not. These rules are issued by way of a legally-binding Directive.

      • MIE-B.2 Definitions

        For the purpose of this Module, the following definitions shall apply:

        • MIE-B.2.1

          "Capital Market Service Provider" means any financial institution or personG involved in providing by itself or as agent, any activity specified under Article 80 of the CBB Law.

        • MIE-B.2.2

          "CMSD" means the Capital Markets Supervision Directorate of the Central Bank of Bahrain.

        • MIE-B.2.3

          "Enforcement Decision Committee (EDCG )" means the committee constituted by the CBB for the purpose of taking enforcement decisions of material significance, on behalf of the CBB. The EDCG exercises enforcement powers on behalf of the CBB and acts independently from the CBB's executive management structure.

        • MIE-B.2.4

          "Enforcement order" means an order issued by the CBB for imposing penalty or other enforcement actions pursuant to a decision made by the EDCG after considering the alleged contraventions and the representations, if any, made by the recipient of a warning noticeG .

        • MIE-B.2.5

          "Inspection" means an inspectionG undertaken by official(s) of the CMSDG to inspect SROG 's, capital market service providersG , listed companies and members of SROsG , as per Article 114 of the CBB Law.

        • MIE-B.2.6

          "Investigation" means a formal investigationG or preliminary investigationG undertaken by any official(s) of the CMSDG or any professional firm appointed by the CBB, as per Article 121 of the CBB Law.

        • MIE-B.2.7

          "Investigator" means any official(s) of the CMSDG or any professional firm appointed by the CBB under Article 121 of the CBB Law to conduct an investigationG .

        • MIE-B.2.8

          "Person" means unless the context requires otherwise, a natural or legal personG .

        • MIE-B.2.9

          "SecuritiesG " means shares or bonds issued by shareholding companies, government debt instruments and the following financial instruments:

          (a) SharesG in companies and other securitiesG equivalent to shares in companies or other entities, and depositary receipts in respect of shares;
          (b) BondsG or other forms of debt, including depositary receipts in respect of such securitiesG ;
          (c) WarrantsG ;
          (d) Units, rights or interestsG (however described) of the participantsG in a collective investment scheme;
          (e) Options, futuresG and any other derivative contracts relating to commodities that must be settled in cash, or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);
          (f) Options, futuresG and any other derivative contract relating to commodities that can be physically settled;
          (g) Units to Real Estate Investment Trusts (REITs);
          (h) Index tracking products including Islamic indices;
          (i) Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such instrument on an exchange; and
          (j) Islamic securitiesG , being those financial instruments that are Shari'a compliant.

        • MIE-B.2.10

          "Self-Regulatory Organizations (SROG s)" means any organization licensed by the CBB under the Markets and Exchanges (MAE) Module, or the Clearing, Settlement and Central Depository (CSD) Module, or any other organization recognized as an SROG by the CBB.

        • MIE-B.2.11

          "Warning Notice" means a notice issued by the CBB pursuant to the EDCG 's decision and contains the contraventions committed by the recipient with respect to the CBB Law, rules and regulations and other applicable laws, rules and regulations and accompanied by the evidence that convinced the EDCG that such contravention had occurred.

    • MIE-1 Market Surveillance

      • MIE-1.1 Market Surveillance

        • Market Surveillance

          • MIE-1.1.1

            The CBB's surveillance function is focused on identifying potential breaches of the relevant laws, rules and regulations and those responsible for the potential breaches. The surveillance function includes the following:

            a) Policy formulation for introducing the surveillance systems to bring integrity, safety and stability in the securitiesG market in the Kingdom of Bahrain;
            b) Gather and analyze information for the purpose of spotting abnormal situations in the market;
            c) Detect potential contraventions of relevant laws, rules and regulations and identify those responsible for such contraventions;
            d) Conduct preliminary investigationsG ;
            e) Take interim enforcement actions, if warranted;
            f) Pursue preventative action, if required, and avoid market disruptions at the earliest possible time;
            g) Initiate formal investigationsG .

          • MIE-1.1.2

            The Market Surveillance, Investigation and Enforcement Department of the Capital Markets Supervision Directorate (CMSDG ) within the CBB is responsible for the market surveillance function relating to the securitiesG market in the Kingdom of Bahrain.

          • MIE-1.1.3

            The CBB may apply, adopt, determine and implement various measures, mechanisms and requirements, as may be required from time-to-time.

          • MIE-1.1.4

            Licensed exchanges and market operators, licensed clearing houses and depositories, and other capital market service providersG and members of SROsG must have appropriate systems and procedures for the detection of potential cases of unlawful transactions and contraventions of the CBB Law, rules and regulations and report to the CBB at the earliest stage possible.

      • MIE-1.2 Information Gathering for Market Surveillance

        • MIE-1.2.1

          As part of the market surveillance function, the CBB may exercise its powers under Part 7 and Part 9 of the CBB Law for obtaining information, data, documents and explanations from:

          (a) Self-Regulatory OrganizationsG (SROG s), including licensed exchanges, licensed clearing houses and depositories, and related parties;
          (b) Capital market service providersG and members of SROsG and related parties;
          (c) Listed companies and issuers of securitiesG ;
          (d) Any other personG who is in the possession of information or documents relevant for the purpose of conducting specific preliminary investigationsG by the CBB.

        • Type of Information

          • MIE-1.2.2

            For the purpose of this Module, information includes:

            (a) Any books, records or registers required to be maintained by an SROG or a capital market service providerG , or a member of an SROG and related parties under the CBB Law, rules and regulations and any other law, rules and regulations;
            (b) Information, books, records or documents known to or in the possession of a capital market service providerG , or a member of an SROG and related party;
            (c) Any books, records or registers required to be maintained by a listed company and issuers of securitiesG under the CBB Law, rules and regulations and any other law, rules and regulations;
            (d) Information, books, records or documents known to or in the possession of a listed company and issuers of securitiesG ;
            (e) Information, books, records or documents maintained by or known to or in the possession of any other personG in respect of a preliminary investigationG .

          • MIE-1.2.3

            In this Module, a reference to disclosing information includes, in relation to information that is contained in a document, a reference to producing the document.

          • MIE-1.2.4

            As per Articles 111 and 112 of the CBB Law, the CBB may demand any information, documents, statistics or reports from any licensee or licensed exchange or licensed clearing house, depository, listed company and issuers of securitiesG within the specified time.

        • Acquisition and Disposal of Securities or Futures Contract

          • MIE-1.2.5

            Without prejudice to the generality of rule MIE-1.2.4:

            (a) The CBB may, where it considers it necessary for the protection of investors, require a capital market service providerG or a member of an SROG , or licensed exchange, or licensed clearing house and depository to disclose to the CBB in relation to any acquisition or disposal of securitiesG or futures contracts:
            (i) The name of the personG from or through whom or on whose behalf the securitiesG or futures contracts were acquired; or
            (ii) The name of the personG to or through whom or on whose behalf the securitiesG or futures contracts were disposed of;
            and the nature of the instructions given to the licensee or licensed exchange, or licensed clearing house and depository in respect of the acquisition or disposal.
            (b) The CBB may require a personG who has acquired, held or disposed of securitiesG or futures contracts to disclose to the CBB whether he acquired, held or disposed of those securitiesG or futures contracts, as the case may be, as custodian or trustee for, or on behalf of, another personG (whether or not as a nominee), and if so:
            (i) The name of that other personG ; and
            (ii) The nature of any instructions given to the first-mentioned personG in respect of the acquisition, holding or disposal.
            (c) The CBB may require a licensed exchange to disclose to the CBB in relation to an acquisition or disposal of securitiesG , or futures contracts on the licensed exchange, the names of the members of that licensed exchange who acted in the acquisition or disposal.
            (d) The CBB may require a licensed clearing house and/or depository for a securitiesG market or futures market to disclose to the CBB in relation to any dealing in securitiesG on that securitiesG market, or trading in futures contracts on that futures market, the names of the members of the licensed clearing house and/or depository who were concerned in any act or omission in relation to the dealing or trading.

        • Exercise of Certain Powers in Relation to Securities

          • MIE-1.2.6

            Where the CBB considers that:

            (i) It may be necessary to prohibit under the Markets & Exchanges (MAE) Module dealing in securitiesG of, or made available by, a company or an issuer of securitiesG ;
            (ii) A personG may have contravened any of the provisions of the Market Abuse and Market Manipulation (MAM) Module in relation to securitiesG of, or made available by, a company; or
            (iii) A personG may have contravened any of the provisions of the Disclosure Standards Module or Take-overs, Mergers, Acquisitions and Share Repurchases (TMA) Module in relation to securitiesG in a company;

            The CBB may require an officer of a company, or an issuer of securitiesG , referred to in paragraph (a) to disclose to the CBB any information of which he is aware and which may have affected any dealing that has taken place, or which may affect any dealing that may take place, in securitiesG of or made available by, the company or the issuer of securitiesG .

          • MIE-1.2.6A

            Where the CBB believes on reasonable grounds that a personG is capable of giving information concerning any of the following matters:

            (i) Any dealing in securitiesG of, or made available by, a company or an issuer of securitiesG referred to in paragraph (a);
            (ii) Any advice given or any report or analysis issued or published concerning such securitiesG , by any capital market service providerG or a member of an SROG to deal in securitiesG , or a representative of such a holder;
            (iii) The financial position of any business carried on by a personG who is or has been (either alone or together with another personG or other personsG ) the holder of a capital market service providerG and member of an SROG to deal in securitiesG and who has dealt or given advice or issued or published a report or an analysis concerning such securitiesG ;
            (iv) The financial position of any business carried on by a nominee controlled by a personG referred to in paragraph (iii) or jointly controlled by two or more personsG at least one of whom is a personG referred to in that paragraph; or
            (v) An audit of, or any report of an auditor concerning any book of the capital market service providerG or the member of an SROG to deal in securitiesG , being a book relating to dealings in such securitiesG ;

            the CBB may require the personG to disclose to the CBB the information that the personG has about the matter.

        • Exercise of Certain Powers in Relation to Futures Contracts

          • MIE-1.2.7

            (a) Where the CBB considers that:
            (i) It may be necessary to give a direction or take any action in relation to any trading in futures contracts under the Markets & Exchanges (MAE) Module;
            (ii) A personG may have contravened any of the provisions of the Market Abuse & Market Manipulation (MAM) Module in relation to futures contracts.
            (b) Where the CBB believes on reasonable grounds that a personG is capable of giving information concerning the following matters:
            (i) Any trading in futures contracts;
            (ii) Any advice given publicly or privately, or any report or analysis issued or published concerning such futures contracts by the capital market service providerG , or the member of an SROG , to trade in futures contracts, or a representative of such a holder;
            (iii) The financial position of any business carried on by a personG who is or has been (either alone or together with any personG or other personsG ) the capital market service providerG or the member of an SROG to trade in futures contracts and has traded in or given advice or issued or published a report or an analysis concerning such futures contracts;
            (iv) The financial position of any business carried on by a nominee controlled by a personG referred to in paragraph (iii) or jointly controlled by two or more personsG , at least one of whom is a personG referred to in that paragraph; or
            (v) An audit of, or any report of an auditor concerning any book of the capital market service providerG or the member of an SROG to trade in futures contracts, being a book relating to trading, clearing or settlement in such futures contracts;
            the CBB may require the personG to disclose to the CBB the information that the personG has about that matter.

        • Self-Incrimination

          • MIE-1.2.8

            (a) A personG is not excused from disclosing information to the CBB under a requirement made of him under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, on the grounds that the disclosure of the information might tend to incriminate him.
            (b) Where a personG claims before making a statement disclosing information that he is required to disclose by a requirement made of him under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, that the statement might tend to incriminate him, that statement shall not be used by the CBB to support any CBB disciplinary measures against him.

        • Savings for Advocates and Solicitors

          • MIE-1.2.9

            (a) Nothing in Section 1.2 shall compel the disclosure by an advocate and solicitor of information containing a privileged communication made by or to him in that capacity.
            (b) An advocate and solicitor who refuses to disclose the information referred to in paragraph (a) shall nevertheless be obliged to give the name and address (if he knows them) of the personG to whom, or by or on behalf of whom, that privileged communication was made.

        • Immunities Under CBB Law

          • MIE-1.2.10

            (a) The CBB shall not bring any civil or criminal proceedings, other than proceedings for an offence under rule MIE-1.2.11 against any personG for disclosing any information to the CBB, if he had done so in good faith in compliance with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, 1.2.6A or MIE-1.2.7.
            (b) Any personG who complies with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7 shall not be treated by the CBB as being in breach of any restriction upon the disclosure of information or thing imposed by any prescribed written law, or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.

        • Offences

          • MIE-1.2.11

            (a) A personG who, without reasonable excuse, refuses or fails to comply with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, may be guilty of an offence of concealing information, or providing false information, or obstructing a current investigationG , or an investigationG likely to be conducted by the CBB in accordance with Part 9 of the CBB Law, punishable under Articles 163 and 170 of the CBB Law.
            (b) A personG who, in purported compliance with a requirement of the CBB under rules MIE-1.2.4, MIE-1.2.5, MIE-1.2.6, MIE-1.2.6A or MIE-1.2.7, discloses information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.
            (c) It may be a defence to prosecution for an offence under paragraph (b) if the defendant proves that he believed on reasonable grounds that the information or statement was and was not misleading.

        • Copies of Extracts from Documents to be Admitted as Evidence

          • MIE-1.2.12

            (a) The CBB shall treat copies of or extracts from a document produced under this Module that are provided to be a true copy of the document, or the relevant part of the document, as if they were the original document, or the relevant part of the original document.
            (b) For the purposes of paragraph (a), evidence that a copy of or extract from a document is a true copy of the document or of a part of the document may be given by a personG who has compared the copy or extract with the document or the relevant part of the document and may be given orally or by an affidavit sworn, or by a declaration made before a personG authorised to take an affidavit or statutory declarations.

      • MIE-1.3 Information from Licensed Exchanges and Other Self-Regulatory Organizations

        • MIE-1.3.1

          Without prejudice to the generality of rule MIE-1.2.4 and apart from using reports, notifications, communications, information, records, data and documents and explanations already provided to the CBB by the licensed exchanges, licensed market operators and licensed clearing houses, and central depositories, the CBB may also use methods of obtaining information mentioned in paragraph MIE-1.3.2, in addition to the usual methods of obtaining information from licensees.

        • MIE-1.3.2

          The methods of obtaining information referred to in paragraph MIE-1.3.1, which may be used by the CBB, may include but not be limited to:

          (a) Online connectivityG

          The CBB may require the licensed exchanges, licensed market operators, licensed clearing houses and central depositories to establish and maintain online connectivity with the CBB for the purpose of receiving on a continuous basis, as well as on a periodical basis (including real-time, intra-day, daily, weekly, monthly, quarterly and/or annually), such market transaction information, market referential information and any other data or information. For this purpose, the CBB may require a direct online connectivity to the trading system, clearing and settlement facilities and depository facilities. The CBB may collect, validate, transform, consolidate and load such information and other information received from various sources for the purpose of market surveillance, research and regulatory analysis into the CBB's systems and records.
          (b) Periodic and Emergency MeetingsG

          The CBB may, as part of its market surveillance function and/or overall regulatory oversight function, conduct periodic meetings and emergency meetings with the licensed exchanges, market operators, licensed clearing houses and central depositories. The CBB may obtain information, reports, documents and data during or pursuant to such periodical or emergency meetings, and use the same for the purposes of the market surveillance function of the CBB.
          (c) Periodic and Event Based Reports (Electronic Form or Physical Form)G The CBB may stipulate periodic and event-based reports for the purpose of market surveillance, in addition to other reporting requirements applicable to licensed exchanges, market operators, licensed clearing houses and central depositories under the MAE Module and CSD Module respectively; and other rules and regulations. The CBB requires these reports either in electronic form or in physical form.
          (d) InspectionG

          The CBB may conduct an inspectionG under the MAE Module or CSD Module, either an overall inspectionG or a special purpose inspectionG as part of the surveillance function of a licensed exchange or market operator, or licensed clearing house or central depository, and use the information, data, reports, records and documents obtained through such inspectionG for the purpose of the CBB's market surveillance function.
          (e) Information Provided to Public InvestorsG

          The CBB may also use the information made available by licensed exchanges, market operators, licensed clearing houses or central depositories to the public investors for the purpose of market surveillance.
          (f) Referrals from SROsG

          If a licensed exchange, market operator, licensed clearing house or central depository (SROG ) discovers any conduct in violation or contravention of the CBB Law, rules and regulations, business rules of such SROG , or any other applicable laws, rules and regulations, the concerned SROG shall, apart from taking action based on its own findings and investigationsG on the matter, refer the potential contraventions to the CBB via the Market Surveillance, Investigation & Enforcement Department within the CBB's Capital Markets Supervision (CMS) Directorate. Such referrals shall contain or be followed by a detailed investigationG report on the matter and the evidence obtained by the SROG .
          (g) Investigation ReportG

          The CBB may require a licensed exchange, market operator, licensed clearing house or central depository to conduct an investigationG on any matter considered appropriate by the CBB for the purpose of the CBB's market surveillance function, and to submit a detailed investigationG report on the matter required by the CBB to be investigated, along with the evidence collected during the investigationG , for the findings and conclusions of such investigationG .

      • MIE-1.4 Information from Capital Market Service Providers and Members of SROs

        • MIE-1.4.1

          Without prejudice to the generality of rule MIE-1.2.4 and apart from using reports, notifications, communications, information, records, data, documents and explanations already provided to the CBB by the capital market service providersG and members of an SROG , the CBB may also use the methods of obtaining information mentioned in paragraph MIE-1.4.2, in addition to the other ongoing obligations and reporting obligations of the respective capital market service providerG or the member of an SROG for the purpose of the CBB's market surveillance function.

        • MIE-1.4.2

          The methods of obtaining information referred to in paragraph MIE-1.4.1 which may be used by the CBB may include, but not be limited to:

          (a) Formal Request for InformationG

          As part of the CBB's ongoing supervision or specifically for the purpose of the market surveillance function, the CBB may, by direction, specifically request information or temporary or ad-hoc reporting from a licensee under Article 111 of the CBB Law, or from personsG related to any licensee under Article 113 of the CBB Law, and the recipients of such request are bound to provide the information requested within the time specified by the CBB.
          (b) MeetingsG

          Apart from the normal meetings, periodical prudential meetings, or any other special purpose meeting, the CBB may convene a meeting with a CBB licensee for the purpose of discussing matters relating to the market surveillance function of the CBB.
          (c) Periodic Reports and Event-Based Reports (in Electronic Form or Physical Form)G

          The CBB may use the periodic reports and event-based reports submitted by a capital market service providerG or a member of an SROG to the CBB, or to a self-regulatory organizationG (SROG ) (including a licensed exchange or market operator and a licensed clearing house or central depository). For example, the CBB may use a Suspicious Transaction Report made by a capital market service providerG or a member of an SROG under the Anti-Money Laundering and Combating Financial Crime Module (AML/CFC Module), or the Prohibition of Market Abuse and Market Manipulation Module (MAM Module) for the purpose of obtaining information relating to market surveillance. The CBB may require these reports either in electronic form or physical form.
          (d) InspectionG

          The CBB may conduct an inspectionG as per the Inspection Module and use the information obtained through such inspectionG for the purpose of the CBB's market surveillance function.
          (e) Additional Responsibilities to AuditorsG

          As per Article 63 of the CBB Law, the CBB may request from the external auditors of a capital market service providerG or a member of an SROG to increase the scope of audit and provide additional information to the CBB, and the information and reports provided by the external auditors can be used by the CBB for the CBB's market surveillance function.
          (f) Notifications, Registrations, Filings and other CommunicationsG

          The CBB may use any information contained in any of the notifications, registrations, filings and other communications received from the CBB licensees and related parties for the purpose of the market surveillance function.
          (g) Record of Telephone Conversations and Electronic CommunicationsG

          The CBB may use the records of telephone conversations and electronic communications that are required to be maintained by a capital market service providerG or a member of an SROG for the purposes of the CBB's market surveillance function.

      • MIE-1.5 Information from Listed Companies and Issuers of Securities

        • MIE-1.5.1

          As per Article 112 of the CBB Law, the CBB may require any listed company or issuer of securitiesG , or any personG acting on their behalf, to provide such information as the CBB deems necessary for discharging its duties and responsibilities under this Law.

        • MIE-1.5.2

          Without prejudice to the generality of paragraph MIE-1.5.1, the CBB may, in addition to using reports, notifications, announcements, annual reports, reports, communications, records, data and explanations received from any listed company or issuer of securitiesG , also use methods mentioned in paragraph MIE-1.5.3 for obtaining information in addition to the usual methods of obtaining information from listed companies and issuers of securitiesG .

        • MIE-1.5.3

          The methods of obtaining information referred to in paragraph MIE-1.5.2 which may be used by the CBB to obtain information from listed companies and issuers of securitiesG include, but are not limited to:

          (a) Formal Request for Information

          The CBB may require any listed company or issuer of securitiesG to provide such information as the CBB deems necessary, for the purpose of the CBB's market surveillance function within the time specified by the CBB.
          (b) Inspection

          The CBB may conduct an inspectionG as per the Inspection Module and use the information obtained through such inspectionG for the purpose of the CBB's market surveillance function.
          (c) Additional Responsibilities to Auditors

          As per Article 63 of the CBB Law, the CBB may request from the external auditors of a listed company or issuer of securitiesG to increase the scope of audit and provide additional information to the CBB, and the information and reports provided by the external auditors can be used by the CBB for the CBB's market surveillance function.
          (d) Notifications, Registrations, Filings and other Communications

          The CBB may use any information contained in any of the notifications, registrations, filings and other communications received from listed companies and issuers of securitiesG and related parties for the purpose of the market surveillance function.
          (e) Meetings

          The CBB may convene a meeting with any issuer or listed company for the purpose of discussing matters relating to the market surveillance function of the CBB.
          (f) Periodic Reports

          The CBB may use the periodic and other reports submitted by the listed companies and issuers for the purpose of the CBB's market surveillance function.

      • MIE-1.6 Referrals from Other Domestic Authorities

        • MIE-1.6.1

          The CBB may use information contained in referrals received from other domestic authorities, including but not limited to the Ministry of Industry & Commerce (MOIC) and the Financial Intelligence Unit (FIU) within the Ministry of Interior (MOI) based on the discovery made by them regarding potential cases of contravention of the CBB Law, rules and regulations and other applicable laws, rules and regulations.

      • MIE-1.7 Referrals from Overseas Authorities

        • MIE-1.7.1

          The CBB may receive referrals from overseas authorities, either pursuant to the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), or other multilateral/bilateral arrangements, or otherwise, leading to potential cases of contravention of the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, and such referrals can also be used by the CBB for the CBB's market surveillance function.

      • MIE-1.8 Complaints from the Public and Information from Other Sources

        • MIE-1.8.1

          Complaints from the public and customers of the CBB licensees are received by the CBB in the complaint forms available on the CBB's official website and such complaints which relate to potential cases of contravention of the CBB Law, rules and regulations, or SROsG ' business rules are also used by the CBB for the purpose of the CBB's market surveillance function.

          The CBB's surveillance function also uses information disseminated through the media, included newspapers, television, newsletters, internet, research reports and other media.

      • MIE-1.9 Reports from Experts

        • MIE-1.9.1

          Article 121 of the CBB Law enables the CBB to appoint qualified investigatorsG (including professional firms) and Article 63 of the CBB Law enables the CBB to request additional duties from external auditors.

          The CBB may at its discretion, require a CBB licensee or a listed company or an issuer of securitiesG , or any other relevant personG to provide a report by an expert in order to support the CBB's market surveillance, investigationG and enforcement functions. The costs associated with such appointment of an expert shall be borne by personsG required to appoint an expert.

        • MIE-1.9.2

          The factors the CBB will consider when deciding whether to use an expert include:

          (a) If the CBB's objectives for making further enquiries are predominantly for the purposes of fact finding; i.e. gathering historic information or evidence for determining whether enforcement action may be appropriate, the CBB's information gathering and investigationG powers under Part 7 of the CBB Law are likely to be more effective and more appropriate than appointing an expert.
          (b) If the CBB's objectives include obtaining expert analysis or recommendations (or both) for say, the purposes of seeking remedial action, it may be appropriate to appoint an expert instead of or in conjunction with the CBB's other available powers.

        • MIE-1.9.3

          The CBB shall normally make clear both to the personsG referred to in rule MIE-1.9.1and to the expert, the nature of the concerns that led the CBB to decide to appoint an expert, and the possible uses of the results of the report. A report the CBB commissions for purely diagnostic purposes may identify issues which could lead to the appointment of an investigatorG and/or enforcement action.

        • MIE-1.9.4

          The CBB shall:

          a) Require personsG referred to in rule MIE-1.9.1 to appoint experts only for specific purposes, rather than for general enquiry;
          b) Not use the procedure as a matter of routine in relation to particular personsG ;
          c) Use the procedure only after having considered the alternatives;
          d) Normally use the procedure because of the added value to be gained from use of an expert, because of their particular expertise or knowledge, not because of CBB's resource constraints;
          e) Take into account cost implications, including whether the likely cost of an expert's report is proportionate and will provide enough benefit, having regard to the issue in question and the resources of the personsG referred to in rule MIE-1.9.1;
          f) Take into account the expected benefit to the personsG referred to in rule MIE-1.9.1; and
          g) Use the procedure in a focused, proportionate way and ensure that reports are scoped accordingly.

          This policy does not preclude the use of the same procedure for generically similar purposes in different cases, for example, to review systems and controls of personsG referred to in rule MIE-1.9.1 or to obtain verification of information provided to the CBB.

        • Who the CBB will Nominate or Approve when Using Experts

          • MIE-1.9.5

            When considering whether to nominate or approve an expert to make a report, the CBB will have regard to such factors as whether the proposed personG appears to have:

            (a) The skills necessary to make a report on the matter concerned;
            (b) The ability to complete the report within the time required;
            (c) Relevant specialised knowledge on the matter to be reported on;
            (d) Any professional difficulty or potential conflict of interest in reviewing the matters to be reported on, including but not limited to questions reflecting on the quality or reliability of work previously carried out by the expert;
            (e) Independence, bearing in mind the closeness of any existing professional or commercial relationship, to give an objective opinion on such matters as:
            (i) Matters already reported on by the expert (e.g. on the firm's financial statements or in relation to a firm's systems and controls);
            (ii) Matters that are likely to be contentious and may result in disciplinary or other enforcement actions against the personsG referred to in rule MIE-1.9.1, its management, shareholders or major shareholders; or
            (iii) Matters that the expert has been involved in, in another capacity.

          • MIE-1.9.6

            In appropriate circumstances it may be cost effective for the CBB to nominate or approve the appointment of an expert who has already acted for, or advised the personsG referred to in rule MIE-1.9.1. For example, the CBB may nominate or approve the appointment of a firm's auditor to prepare a report, taking into account where relevant, the considerations set out in paragraph MIE-1.9.2.

      • MIE-1.10 Detection of Potential Cases of Contraventions

        • MIE-1.10.1

          The Market Surveillance Department at the CBB's CMSDG captures all the relevant information, reports, data and documents received from various sources and stores them in its records and systems for the purpose of regulatory analyses and market surveillance function, and identifies potential cases of contravention of the CBB Law, rules and regulations, and other applicable laws, rules and regulations, particularly contravention of the MAM Module. On-line and off-line alerts are generated based on the information available and analysis made of potential cases of contraventions and such alerts are further examined by the Market Surveillance Department at the CMSDG , to evaluate the potential evidences indicating suspicions of contraventions.

      • MIE-1.11 Determination of Preliminary Investigation

        • MIE-1.11.1

          If the analysis of the known facts and potential evidence indicates contraventions, the Market Surveillance Department at the CMSDG shall consider whether a sufficient, credible source of facts and evidence suggests contravention of the CBB Law, rules and regulations and/or an enforcement action is warranted. Some of the factors that could be considered by the market surveillance include, but are not limited to:

          (a) The laws, rules or regulations that could potentially be considered as having been contravened or violated;
          (b) The severity and/or seriousness of such contravention or violation;
          (c) The potential magnitude of such contravention or violation;
          (d) The potential losses involved or harm to an investor or investors;
          (e) Whether the affected group is particularly vulnerable or at risk;
          (f) Whether the conduct is ongoing;
          (g) Whether the conduct can be investigated efficiently;
          (h) Whether SROsG or other authorities might be better suited to investigate the conduct.

        • MIE-1.11.2

          After conducting an analysis referred to in paragraph MIE-1.11.1, the Market Surveillance Department shall consult with the Director of the CMSDG regarding any further analysis that should be undertaken, before determining whether a preliminary investigationG of the potential cases of contravention shall be undertaken. Based on such further analysis, the Market Surveillance Department shall seek the final approval of the Director of the CMSDG for opening a preliminary investigationG as part of the market surveillance function.

      • MIE-1.12 Preliminary Investigation

        • Information from Third Parties During Preliminary Investigation

          • MIE-1.12.1

            As per Article 123 of the CBB Law, the CBB may require any personG who is in possession of information or documents relevant to an investigationG conducted by the CBB, to promptly present such information and documents to the CBB.

          • MIE-1.12.2

            Pursuant to a preliminary investigationG referred to in section MIE-1.11, the CMSDG , or any official of the CBB authorised in this regard, may take copies or extracts from such documents referred to in rule MIE-1.12.1 and also require the personG producing such a document, or any other relevant personG to provide an explanation, including written explanations, of the contents of the document.

          • MIE-1.12.3

            If a personG required under rule MIE-1.12.1 to produce the document required fails to produce such a document, but he has information about the whereabouts of such a document, then he must indicate to the CMSDG , or any official of the CBB authorised in this regard, where the document is located and who is in possession of the document.

        • Access to Premises, Information and Documents

          • MIE-1.12.4

            As per Articles 114 and 124 of the CBB Law, the CMSDG , or any other CBB staff who are authorised to undertake a preliminary investigationG referred to in section MIE-1.11, may enter and inspect the premises, offices, or locations of any SROG , or member of an SROG or capital market service providerG , to obtain any information or necessary documents or data.

          • MIE-1.12.5

            If necessary, the CMSDG or the authorised CBB staff may retain any documents obtained by virtue of the provisions of the previous paragraph for a period not exceeding six months. However, if the procedures of a trial of any personG commenced in connection with committing a crime within the period of the specified six months and the procedures of the said trial continued beyond this period, and the mentioned documents prove to be of relevance to such procedures, then the CMSDG or the authorised CBB staff may retain such documents up to the end of the said trial procedures, or to any other date determined by the Competent Court.

          • MIE-1.12.6

            As per Article 123 of the CBB Law, it shall be the duty of every personG who is in possession of information or documents relevant to a preliminary investigationG conducted by the CBB to:

            (a) Allow the staff of the CMSDG or the authorised CBB staff to have access to the premises, offices and locations occupied by such personsG at all reasonable times for the purpose of preliminary investigationG .
            (b) Extend the staff of the CMSDG or the authorised CBB staff facilities for examining any books, accounts and other documents in the custody or control (whether kept manually or in a computer, or in any other form) of such personG , required for the purposes of the preliminary investigationG .
            (c) Provide to such staff of the CMSDG or the authorised CBB staff copies of any books, records, documents, information, data and explanation which in the opinion of the staff of the CMSDG are relevant to the preliminary investigationG .

          • MIE-1.12.7

            If the staff of the CMSDG or the authorised CBB staff fail to enter and inspect the premises, offices, or locations of any SROG , or member of an SROG or capital market service providerG , to obtain any information, or documents, or data, then the CMSDG shall seek approval for formal investigationG , and the CMSD investigatorG appointed to conduct the formal investigationG may seek a court order, as per Article 124 of the CBB Law, to carry out the following:

            (a) Entering and inspecting specific premises and obtaining relevant information, data, or documents.
            (b) Copying or taking extracts of any relevant document, information or data.
            (c) Compelling any personG employed by any SROG , or member of an SROG or capital market service providerG , to give an explanation, or to specify the whereabouts of any documents, information, or data.

            Compelling force may be used, where necessary.

          • MIE-1.12.8

            The CMSDG should evaluate the facts and evidence gathered during the preliminary investigationG to determine whether it is appropriate to:

            (a) Open a formal investigationG considering the factors mentioned in section MIE-1.13; or
            (b) Close the preliminary investigationG without any recommendation for enforcement actions; or
            (c) Initiate appropriate enforcement actions, without opening up a formal investigationG , based on the findings of the preliminary investigationG , and facts and evidence of the case.

          • MIE-1.12.9

            In respect of cases where it is determined to open a formal investigationG and if it is considered appropriate to initiate appropriate interim enforcement measures swiftly, before further damage is done and remedial actions are taken as early as possible, the CMSDG shall evaluate and initiate appropriate interim enforcement measures that are required to be taken, pending the outcome of the formal investigationsG on the case.

          • MIE-1.12.10

            After determining the outcome of the preliminary investigationG and recommended course of interim or final enforcement measures, the CMSDG staff authorised to conduct the preliminary investigationG shall submit the preliminary investigationG report containing the findings of the preliminary investigationG , facts and evidence of the case along with the recommended course of action, based on the outcome of the preliminary investigationG mentioned in rule MIE-1.12.7 and paragraph MIE-1.12.8. The said report shall be submitted to the CMSDG within 30 days from the date of approval of the opening of the preliminary investigationG .

          • MIE-1.12.11

            The CMSDG shall decide on the course of action of the preliminary investigationG mentioned in rule MIE-1.12.7 and also, if required, decide on the interim or final enforcement actions and seek the approval of H.E. the Governor for the same.

          • MIE-1.12.12

            The procedure and proceedings of the enforcement actions shall be governed by chapter MIE-3 of this Module.

      • MIE-1.13 Preventive Surveillance Actions

        • MIE-1.13.1

          The CBB seeks to proactively prevent contraventions or unfair practices or improper conduct and protect the interests of the public investors and securitiesG market at the earliest possible time and the CBB may take preventive surveillance measures. Such preventive surveillance measures may include but not be limited to:

          (a) Interim Enforcement Actions

          Interim enforcement actions can be taken based on the information, facts and evidence available to the CMSDG and such action can be initiated at the earliest possible time as part of the market surveillance function. Details of such interim enforcement actions are given in chapter MIE-3 of this Module.
          (b) Directives Under Article 38

          The CBB may issue directives to the licensed exchanges, market operators or licensed clearing houses or depositories, or any member of an SROG or any capital market service providerG , or any listed company or any issuer of securitiesG , or any market participant, or any other relevant personG as a preventive surveillance measure. Such directives under Article 38 of the CBB Law may be issued where the CBB believes that it is necessary or expedient in the interest of the public investors or securitiesG market, or for the protection of investors, to take such action as it considers necessary, and such preventive surveillance measures can be imposed either market-wide or be made available to individual securitiesG or issuers or an SROG , or any member of an SROG or capital market service providerG , or market participants or any relevant personsG .
          (c) Imposition of Trading Limits, Margins and Trading Restrictions

          The CMSDG may, as a pro-active surveillance measure in emergency situations, impose limits or restrictions or measures. Such measures may include but not be limited to trading limits, position limits, additional margins, trading restrictions, suspending trading of any securitiesG , freezing of accounts, suspending clearing/settlement of any transaction(s), or offsetting the suspected transactions, or any other prudential limits for the purposes of protecting the interests of investors and the securitiesG market.

    • MIE-2 Formal Investigation

      • MIE-2.1 Scope of Investigation

        • MIE-2.1.1

          Notwithstanding anything in this Module, or any other rules and regulations of the CBB, the Governor of the CBB may, if he thinks fit and it is in the public interest to do so, order an investigationG as per Article 121 of the CBB Law.

          (a) The CBB may conduct such investigationG as it considers necessary or expedient for any of the following purposes:
          (i) to exercise any of its powers or to perform any of its functions and duties under the CBB Law;
          (ii) to ensure compliance with the CBB Law, rules, regulations, directives, or any written direction issued under the CBB Law;
          (iii) to investigate an alleged or suspected contravention of any provision of the CBB Law, rules, regulations, or directives, or any written direction issued under the CBB Law.
          (iv) to investigate whether the transactions in securitiesG are being dealt with in a manner detrimental to the investors or the securitiesG market in violation of the CBB Law, rules and regulations; or
          (v) to investigate whether any SROG , or member of an SROG or capital market service providerG , or listed company or issuer of securitiesG , or any personG associated with the securitiesG market, or any other personG has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder.
          (b) A requirement imposed by the CBB in the exercise of its powers under Parts 7 or 9 of the CBB Law shall be deemed to have effect notwithstanding any obligations as to secrecy or other restrictions upon the disclosure of information imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.
          (c) Any personG who complies with a requirement imposed by the CBB in the exercise of its powers under Parts 7 or 9 of the CBB Law shall not be treated by the CBB as being in breach of any restriction upon the disclosure of information, or thing imposed by any prescribed written law or any requirement imposed thereunder, any rule of law, any contract or any rule of professional conduct.
          (e) In this Module, "requirement by the CBB" includes a requirement imposed by the CMSDG or an investigatorG appointed by the CBB to conduct a formal investigationG .

        • MIE-2.1.2

          When necessary, the CMSDG may appoint one or more qualified investigatorsG to conduct an investigationG with respect to the following, in accordance with Chapter 1 of Part 9 (Articles 121-124) of the CBB Law:

          (a) Nature or position of the business of an SROG , or a member of an SROG or capital market service providerG ;
          (b) A particular aspect of the businesses of an SROG , or a member of an SROG or capital market service providerG ;
          (c) The ownership or control of an SROG , or a member of an SROG or capital market service providerG ;
          (d) Whether the SROG , or a member of an SROG or capital market service providerG is practicing the very business licensed thereto, and assessing to what extent the SROG , or a member of an SROG or capital market service providerG is abiding, in providing the said business, by the provisions of the law and the terms and conditions of the licence.
          (e) Whether an SROG , or a member of an SROG or capital market service providerG is carrying out unlicensed business;
          (f) Whether the listed companies are abiding by the procedures and principles of listing referred to in paragraph (c) of Article (86) of the CBB Law.

          The investigatorG may conduct an investigationG , where necessary, on the business of any member of a group or company to which the SROG , or a member of an SROG , or capital market service providerG under investigationG is a party. The SROG , or a member of an SROG or capital market service providerG under investigationG must be notified in writing of the decision to investigate its business.

        • MIE-2.1.3

          In exercise of powers available to the CBB under Article 38 of the CBB Law, the CBB implements the scope referred to in rule MIE-2.1.2 above for the purpose of achieving the objectives of the CBB stated in Article 3, and discharging duties and responsibilities mandated to the CBB vide Article 4, the matters referred to in rule MIE-2.1.2 (a)-(f) shall include the following:

          (i) InvestigationG of matters considered expedient for the purpose of ensuring compliance with the CBB Law, or any rules or regulations issued thereunder.
          (ii) Alleged or suspected contravention of any provision of the CBB Law or rules and regulations made thereunder, or any directive issued by the CBB.
          (iii) Whether the transactions in securitiesG are being dealt with in a manner detrimental to the investors or the securitiesG market in violation of the CBB Law, rules and regulations; or
          (iv) Whether any SROG , or a member of an SROG or capital market service providerG or listed company or issuer of securitiesG , or any personG associated with the securitiesG market, or any other personG has violated any of the provisions of the CBB Law, or the rules, regulations or directives issued thereunder or business rules of SROsG .

        • Self-Incrimination and Savings for Advocates and Solicitors

          • MIE-2.1.4

            (a) A personG is not excused from disclosing information to the CBB or, as the case may be, an investigatorG under paragraph (b) under a requirement made of him under any provision of this Module, on the grounds that the disclosure of the information might tend to incriminate him.
            (b) Where a personG claims, before making a statement disclosing information that he is required to under any provision of this Module to the CBB or, as the case may be, an investigatorG appointed by the CBB to conduct a formal investigationG , that the statement might tend to incriminate him, that statement shall not be used by the CBB to support any CBB disciplinary measures against him.
            (c) Nothing in this Module shall:
            (i) Compel an advocate and solicitor to disclose or produce a privileged communication, or a document or other material containing a privileged communication, made by or to him in that capacity; or
            (ii) Authorise the taking of any such document or other material which is in his possession.
            (d) An advocate and solicitor who refuses to disclose the information to produce the document or other material referred to in paragraph (c) shall nevertheless be obliged to give the name and address (if he knows them) of the personG to whom, or by or on behalf of whom, that privileged communication was made.

      • MIE-2.2 Ordering a Formal Investigation

        • Appointment of Investigator

          • MIE-2.2.1

            (a) The CMSDG may, at any time by order in writing, direct any official of the CMSDG specified in the order to conduct a formal investigationG into the affairs of any SROG , or member of an SROG or capital market service providerG , listed company or issuer of securitiesG , or personsG associated with the securitiesG market or any other personG , and to report thereon to the CBB, as per Article 121 of the CBB Law.
            (b) The CMSDG may also appoint, with the approval of the Governor, any professional firm to conduct such formal investigationG referred to in paragraph (a) of this rule.

          • MIE-2.2.2

            Before it proceeds with an investigationG , the CMSDG will satisfy itself that there are grounds to investigate under the statutory provisions that give the CBB powers to appoint investigatorsG . If the statutory test is met, it will decide whether to carry out an investigationG after considering all the relevant circumstances. To assist its consideration of cases, the CMSDG will apply a set of assessment criteria stated in paragraph MIE-2.2.4. Not all of the criteria will be relevant to every case and there may be other considerations which are not mentioned in the list, but which are relevant to a particular case. The CMSD'sG assessment will include considering whether using alternative procedures is more appropriate, taking into account the overall circumstances of the personG concerned and the wider context. Another consideration will be whether the CBB is under a general duty to take action on behalf of, or otherwise to provide assistance to another domestic or overseas authority.

          • MIE-2.2.3

            Formal investigationG can be ordered in three ways. Firstly, it can be when a preliminary investigationG opened under section MIE-1.11 can be converted into a formal investigationG based on the findings, facts and evidence gathered during the preliminary investigationG . Secondly, prior to completion of the preliminary investigationG , it may be determined that it would be appropriate to order a formal investigationG on the case. Thirdly, a formal investigationG can also be ordered without any history of a preliminary investigationG on the matter.

        • Factors Considered while Deciding on a Formal Investigation

          • MIE-2.2.4

            Without prejudice to the generality of the powers of the CBB to order formal investigationsG , the factors that may be considered by the CBB, while deciding to order a formal investigationG , include but are not limited to:

            (a) Whether the subject matter is a CBB priority in the context of the CBB's objectives and responsibilities, as per Articles 3 and 4 of the CBB Law.
            (b) Whether an action would address a problematic industry practice.
            (c) Whether the conduct undermines the fairness or integrity of the Kingdom's securitiesG market.
            (d) Whether an action would provide an opportunity for the CBB to address violative conduct targeted to a specific market participant, or group of personsG that might not otherwise be familiar with the CBB, or the protections afforded by the securitiesG laws.
            (e) Whether an action would present a good opportunity to coordinate with other regulators or authorities in the Kingdom and overseas authorities.
            (f) Whether the conduct can be addressed by other regulators or authorities.
            (g) Whether an action would alert the investing public of a new type of securitiesG fraud or misconduct.
            (h) The magnitude of the potential violations involved in the investigationG , considering:
            (i) The severity and seriousness of the conduct;
            (ii) The length of time the conduct continued, or whether it is ongoing;
            (iii) The number of violations;
            (iv) Whether recidivists were involved;
            (v) Whether violations were repeated;
            (vi) The amount of harm or potential harm to victims;
            (vii) The amount of ill-gotten gains to the violators;
            (viii) Whether victims were specifically targeted based on personal or affinity group characteristics;
            (ix) For issuers or members of an SROG or capital market service providerG , whether the conduct involved officers, directors, or senior management;
            (x) Whether gatekeepers (such as accountants or attorneys) or securitiesG industry professionals are involved.
            (i) The resources required to investigate the potential violations, considering:
            (i) The complexity of the potential violations;
            (ii) The approximate staff man days required over the course of the investigationG ;
            (iii) The duration of the relevant conduct;
            (iv) The number of potential violators;
            (v) The number and location of potential witnesses;
            (vi) The volume of evidence that the staff must collect and review, such as trading records, corporate documents and email correspondence;
            (vii) The level of analysis required for complex data and evidence, such as auditor workpapers, bluesheets, or financial data;
            (viii) The number and location of witnesses and the scheduling of the examination of personsG ;
            (ix) Travel requirements.
            (j) Whether there is an urgent need to file an enforcement action, such as an investigationG into ongoing fraud or conduct that poses a threat of imminent harm to investigatorsG .

        • Investigation of Certain Cases

          • MIE-2.2.5

            The combination of the priority given to certain types of misconduct over others and the CBB's risk-based approach to enforcement means that certain cases will be subject to enforcement action and others not, even where they may be similar in nature or impact. The CBB's choice as to the use of the enforcement tool is therefore a question of how the CBB uses its resources effectively and efficiently and how it ensures that it is an effective regulator.

          • MIE-2.2.6

            Where unauthorised business poses a significant risk to the investor protection objective or to the CBB's other regulatory objectives, unauthorised activity will be a matter of serious concern for the CBB. The CBB deals with cases of suspected unauthorised activity in a number of ways and it will not use its investigationG powers and/or take enforcement action in every single instance.

          • MIE-2.2.7

            The CBB's primary aim in using its investigationG and enforcement powers in the context of suspected unauthorised activities is to protect the interests of investors. The CBB's priority will be to confirm whether or not a regulated activity has been carried on in the Kingdom of Bahrain by someone without licensed authorisation or exemption, and if so, the extent of that activity and whether other related contraventions have occurred. It will seek to assess the risk to investors' assets and interests arising from the activity as soon as possible.

          • MIE-2.2.8

            The CBB often takes a different approach to that described above where members of SROsG or capital market service providersG no longer meet the licensing conditions. The CBB views the licensing conditions as being fundamental requirements for licensing and authorisation and it will generally take action in all such cases which come to its attention and which cannot be resolved through the use of supervisory tools. The CBB does not generally appoint investigatorsG in such cases. Instead, members of SROsG or capital market service providersG are first given an opportunity to correct the failure. If the CBB licensee does not take the necessary remedial action, the CBB will consider whether its license to carry out regulated businesses should be varied and/or cancelled. However, there may be cases where the CBB considers that a formal investigationG into a licensing condition concern is appropriate.

          • MIE-2.2.9

            When the CBB has information regarding possible contravention of the Issuing and Offering of Securities Module, or listing rules, or the Disclosure Standards (DIS) Module, or any violation or contravention relating to the primary market, the CBB will use its investigative powers and/or take enforcement action, as deemed fit.

        • Cases where Other Authorities or SROs have an Interest

          • MIE-2.2.10

            Action before or following an investigationG may include, for example, referring some issues or information to other authorities for consideration, including where another authority appears to be better placed to take action. For example, when considering whether to use its powers to conduct formal investigationsG into market misconduct, the CBB will take into account whether another regulatory authority or an SROG is in a position to investigate and deal with the matters of concern (as far as a licensed exchange or market operator or licensed clearing house and depository is concerned, the CBB will consider the extent to which the licensed exchange or market operator, or licensed clearing house and depository has adequate and appropriate powers to investigate and deal with a matter itself). Equally, in some cases the CBB may investigate and/or take action in parallel with another domestic or international authority.

        • Sources of Cases

          • MIE-2.2.11

            The CBB may be alerted to possible contraventions or breaches by complaints from the public or CBB licensees, or listed companies or issuers of securitiesG by referrals from other authorities, or through its own enquiries and supervisory activities. CBB licensees or listed companies, or issuers of securitiesG may also bring their own contraventions to the CBB's attention, as they are obliged to do so under the CBB Law, rules and regulations.

        • Assisting Overseas Regulators

          • MIE-2.2.12

            Providing assistance upon request by an overseas authority will be governed by Article 122 of the CBB Law and the Cooperation and Exchange of Information with Overseas Authorities (ICO) Module.

      • MIE-2.3 Investigation Proceedings

        • MIE-2.3.1

          (a) As per Article 123 of the CBB Law:
          "(i) Any personG who is in possession of information or documents relevant to an investigationG conducted by the Central Bank or its duly appointed investigatorG , should promptly present such information or documents upon request by the Central Bank or its duly appointed investigatorG .
          (ii) If the Central Bank or its duly appointed investigatorG receives a document according to the requirement imposed under this Chapter, it may:
          •  Take copies or extracts from such document.
          •  Require the personG producing the document, or any other relevant personG , to provide an explanation of the contents of the document.
          (iii) If the personG fails to produce the document required, but he has information about the whereabouts of such document, then he should, upon the request of the Central Bank or its appointed investigatorG , indicate where the document is located."
          (b) Examination of Persons

          As per Article 124 of the CBB Law:
          "(i) If the Central Bank or its authorised personG , for any reason, fails to enter and inspect the premises, offices, or locations of the licensee to obtain any information or necessary documents and data, or if the powers conferred to the Central Bank are not sufficient for it to practice its supervision tasks over the business of the licensee, then the Central Bank may seek a court order upon a petition to enable the authorised investigatorsG to carry out the following:
          •  Entering and inspecting specific premises and obtaining relevant information, data or documents.
          •  Copying or taking extracts of any relevant document information or data.
          •  Compelling any personG employed by the licensee to give explanation respecting, or to specify the whereabouts of, any documents, information or data.
          Compelling force may be used, where necessary.
          (ii) If necessary the Central Bank may retain any documents obtained by virtue of the provisions of the previous paragraph for a period not exceeding six months. However, if the procedures of a trial of any personG commenced in connection with committing a crime within the period of the specified six months and the procedures of the said trial continued beyond this period, and the mentioned documents prove to be of relevance to such procedures, then the Central Bank may retain such documents up to the end of the said trial procedures, or to any other date determined by the Competent Court."

        • Requirement to Appear for Examination

          • MIE-2.3.2

            (a) Pursuant to Articles 123 and 124 of the CBB Law and for the purpose of an investigationG under this Module, the CMSDG or its duly appointed investigatorG may, in writing, require a personG :
            (i) To give the CMSDG or its duly appointed investigatorG all reasonable assistance in connection with the investigationG ; and
            (ii) To appear before an officer of the CMSDG or its duly appointed investigatorG for examination under oath and to answer questions under oath.
            (b) A requirement in writing imposed under paragraph (a) shall state the general nature of the matter referred to in paragraph (a).

        • Proceedings at Examination

          • MIE-2.3.3

            The provisions of section MIE-2.3 shall apply where, pursuant to a requirement made under rule MIE-2.3.2 for the purposes of an investigationG under this Module, a personG (referred to in this Module as the examinee) appears before another personG (referred to in this Module as the investigatorG ) for examination.

        • Requirements Made of Examinee

          • MIE-2.3.4

            (a) Pursuant to the powers provided under Article 123(b) of the CBB Law, the investigatorG may examine the examinee on oath or affirmation and may, for that purpose, administer an oath or affirmation to the examinee.
            (b) The oath or affirmation to be taken or made by the examinee for the purposes of the examination is an oath or affirmation that the statements that the examinee will make are true.
            (c) The investigatorG may require the examinee to answer a question that is put to the examinee at the examination and is relevant to a matter that the CMSDG is investigating, or is to investigate, under this Module.

        • Examination to Take Place in Private

          • MIE-2.3.5

            (a) The examination shall take place in private and the investigatorG may give directions as to who may be present during the examination or part thereof.
            (b) A personG shall not be present at the examination unless he is:
            (i) The investigatorG or the examinee;
            (ii) A personG approved by the CMSDG to be present; or
            (iii) Entitled to be present by virtue of a direction under rule MIE-2.3.5(a).

        • Record of Examination

          • MIE-2.3.6

            (a) The investigatorG may, and shall if the examinee so requests, cause a record to be made of statements made at the examination.
            (b) If a record made under rule MIE-2.3.6 (a) is in writing, or is reduced to writing:
            (i) The investigatorG may require the examinee to read the record, or to have it read to him, and may require him to sign it; and
            (ii) The investigatorG shall, if requested in writing by the examinee to give to the examinee a copy of the written record, comply with the request without charge but subject to such conditions as the investigatorG may impose.

        • Giving Copies of Record to Other Persons

          • MIE-2.3.7

            (a) The CBB may give a copy of a written record of the examination, or such a copy together with a copy of any related record, or document, or book, to an advocate and solicitor acting on behalf of a personG who is carrying on, or is contemplating in good faith, a proceeding in respect of a matter to which the examination relates.
            (b) If the CBB give a copy to a personG under rule MIE-2.3.7 (a), the personG , or any other personG who has possession, custody or control of the copy, or a copy of it, shall not except in connection with preparing, beginning or carrying on, or in the course of any proceedings:
            (i) Use the copy or a copy of it; or
            (ii) Publish or communicate to a personG , the copy, a copy of it, or any part of the copy's contents.
            (c) The CBB may, subject to such conditions or restrictions as it may impose, give to a personG a copy of a written record of the examination, or such a copy together with a copy of any related record, or document, or book.

        • Copies Given Subject to Conditions

          • MIE-2.3.8

            If a copy of a written record, or document, or book is given to a personG under rules MIE-2.3.6 (b) or MIE-2.3.7 (c), subject to conditions or restrictions imposed by the CBB, the personG and any other personG who has possession, custody or control of the copy or a copy of it, shall comply with the conditions.

        • Record to Accompany Report

          • MIE-2.3.9

            (a) If, in the CBB's opinion a statement made at an examination is relevant to any other investigationG conducted under this Module;
            (b) If a record of the statement was made under rule MIE-2.3.6; and
            (c) A report about the other investigationG is prepared under this Module, a copy of the record shall accompany the report relating to such other investigationG submitted to the CBB.

        • Offences

          • MIE-2.3.10

            (a) A personG who refuses or fails to comply with rules MIE-2.3.2 or MIE-2.3.4 (c) may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.
            (b) A personG who:
            (i) Refuses or fails to take an oath or make an affirmation when required to do so by an investigatorG examining him under this Module;
            (ii) Refuses or fails to comply with a requirement of an investigatorG under rule MIE-2.3.6 (b) (i); or
            (iii) Refuses or fails to comply with rules MIE-2.3.7 (b) or MIE-2.3.8;
            may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.
            (c) A personG who, in purported compliance with the provisions of this Module, or in the course of examination of the person,G furnishes information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.
            (d) It may be a defence to prosecution for an offence under paragraph (c) if the defendant proves that he believed on reasonable grounds that the information or statement was true and was not misleading.
            (e) A personG who obstructs or hinders the CBB or another personG in the exercise of any power under this Module or the CBB Law, may be guilty of an offence punishable under Articles 163 and 170 of the CBB Law.

        • Powers to Obtain Information

          • MIE-2.3.11

            Power of Authority to order Production of Records, or Documents or Books

            Without prejudice to rule MIE-2.3.1 and for the purpose of an investigationG under this Module, the CBB may in writing, require any personG at a specified time and place to provide information or produce records, or documents, or books relating to any matter under investigationG , and such personG shall comply with that requirement.

          • MIE-2.3.12

            Application for Warrant to Seize Records, or Documents, or Books Not Produced

            (a) Where the CBB has reasonable grounds to suspect that there is, on any particular premises, any record, or document, or book the production of which has been required under rule MIE-2.3.11, and:
            (i) Which has not been produced in compliance with that requirement; or
            (ii) Which the CBB has reasonable grounds to believe will not be produced in compliance with that requirement,
            the CBB may apply to a court for the issue of a warrant authorising the CBB to search the premises for such record, or document, or book, with or without compelling force:
            (iii) To enter and search the premises and to break open and search anything, whether a fixture or not, in the premises; and
            (iv) To take possession of or secure against interference, any record, or document, or book that appears to be a record, or document, or book, the production of which was so required.
            (b) The powers conferred under paragraph (a) are in addition and not in derogation of any other powers conferred by any other written law or rule of law.
            (c) In this Module, "premises" includes any structure, building, aircraft, vehicle or vessel.

          • MIE-2.3.13

            Powers Where Records, or Documents, or Books are Produced or Seized

            (a) This rule shall apply where:
            (i) Records, or documents, or books are produced to the CBB under a requirement made under rule MIE-2.3.11;
            (ii) Under a warrant issued under rule MIE-2.3.12, the CBB or a personG named therein:
            •  Takes possession of records, or documents, or books; or
            •  Secures records, or documents, or books against interference; or
            (iii) Under a previous application of rule MIE-2.3.13 (f) of this section, records, or documents, or books are delivered into the possession of the CBB or a personG authorised by it.
            (b) If paragraph (a) (i) applies, the CBB may take possession of any of the records, or documents, or books.
            (c) The CBB or, where applicable, a personG referred to in paragraph (a) (ii) may:
            •  Examine, and may make copies of or take extracts from, any of the records, or documents, or books;
            •  Use or permit the use of any of the records, or documents, or books for the purposes of any proceedings; and
            •  Retain possession of any of the records, or documents, or books for so long as is necessary.
            (i) For the purposes of exercising a power conferred by this rule (other than paragraph (e));
            (ii) For a decision to be made about whether or not any proceedings to which the records, or documents, or books concerned would be relevant should be instituted; or
            (iii) For such proceedings to be instituted and carried on.
            (d) No personG shall be entitled as against the CBB or, where applicable, a personG referred to in paragraph (a) (ii) to claim a lien on any of the records, or documents, or books, but such a lien is not otherwise prejudiced.
            (e) While the records, or documents, or books are in the possession of the CBB or where applicable, the personG referred to in paragraph (a) (ii) the CBB or personG :
            (i) Shall permit another personG to inspect at all reasonable times such of the records, or documents, or books (if any) as the second-mentioned personG would be entitled to inspect if they were not in possession of the CBB or the first-mentioned person;G and
            (ii) May permit any other personG to inspect any of the records, or documents, or books.
            (f) Unless paragraph (a) (ii) applies, a personG referred to in paragraph (a) (ii) may deliver any of the records, or documents, or books into the possession of the CBB or of a personG authorised by the CBB to receive them.
            (g) Where paragraphs (a) (i) or (ii) applies, the CBB, a personG referred to in paragraph (a) (ii), or a personG into whose possession the records, or documents, or books are delivered under paragraph (f) may require:
            (i) If paragraph (a) (i) applies, a personG who so produced any of the records, or documents, or books; or
            (ii) In any other case, a personG who was a party to the compilation of any of the records, or documents, or books, to explain to the best of his knowledge and belief any matter about the compilation of any of the records, or documents, or books, or to which any of the records, or documents, or books relate.

          • MIE-2.3.14

            Powers where Records, or Documents, or Books are not Produced

            Where a personG fails to comply with a requirement imposed by the CBB under rule MIE-2.3.11 to produce any record, or document, or book, the CBB may require the personG to state to the best of his knowledge and belief:

            (a) The place where such record, or document, or book may be found; and
            (b) The personG who last had possession, custody or control of such record, or document, or book and the place where that personG may be found.

          • MIE-2.3.15

            Copies of or Extracts from Records, or Documents, or Books to be Admitted in Evidence

            (a) Subject to this rule, a copy of or extract from a record, or document, or book referred to in this rule that is proved to be a true copy of the record, or document, or book, or of the relevant part of the record, or document, or book is admissible in evidence as if it were the original record, or document, or book or the relevant part of the original record, or document, or book.
            (b) For the purposes of paragraph (a), evidence that a copy of or extract from a record, or document, or book is a true copy of the record, or document, or book, or of a part of the record, or document, or book, may be given by a personG who has compared the copy or extract with the record, or document, or book, or the relevant part of the original record, or document, or book and may be given orally or by an affidavit sworn, or by a declaration made before a personG authorised to take affidavits or statutory declarations.

          • MIE-2.3.16

            Offences

            (a) A personG who refuses or fails to comply with any requirement imposed under rules MIE-2.3.11, MIE-2.3.13 (g), or MIE-2.3.14 may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.
            (b) A personG who in purported compliance with a requirement under this rule, furnishes information or makes a statement that is false or misleading in a material particular may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.
            (c) It may be a defence to the prosecution for an offence under paragraph (b) if the defendant proves that he believed on reasonable grounds that the information or statement was true and not misleading.
            (d) Any personG who conceals, destroys, mutilates or alters any record, or document, or book relating to a matter that the CBB is investigating or about to investigate under this Module, or who, where such a record, or document, or book is within the territory of the Kingdom of Bahrain, takes or sends the record, or document, or book out of Bahrain, may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.
            (e) A personG who, obstructs or hinders the CBB in the exercise of any power under this rule, or obstructs or hinders a personG who is executing a warrant issued under rule MIE-2.3.12, may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.
            (f) The occupier or the personG in charge of the premises that a personG enters under a warrant issued under rule MIE-2.3.12 who fails to provide to that personG all reasonable facilities and assistance for the effective exercise of his powers under the warrant may be guilty of an offence punishable under Articles 163 and/or 170 of the CBB Law.

        • Information and Records from Telecommunications Operators

          • MIE-2.3.17

            Access to Records of Telecommunication Companies and Internet Service Providers

            As per Article 123 of the CBB Law, if it appears to the CMSDG or its duly appointed investigatorG that the records, information, documents and data recorded in electronic format or otherwise is available, or likely to be available with the telecommunications service providers or internet service providers, and these are relevant to an investigationG conducted by the CMSDG , then the CMSDG or its duly appointed investigatorG may request the Telecommunications Regulatory Authority of the Kingdom of Bahrain to use its powers under the telecommunication laws, rules and regulations to obtain such records or information, or documents or data. Such records, information, documents or data should be provided by such telecommunications service providers or internet service providers, who should promptly present such records, information, documents and data for the purpose of the CMSD's investigationG .

      • MIE-2.4 Investigation Report

        • MIE-2.4.1

          The investigatorG appointed by the CBB to conduct an investigationG shall, on completion of the investigation, after taking into account all relevant findings, conclusions, facts and evidence, submit a report to the CBB, provided that the investigatorG shall submit an interim report pending completion of investigationsG if he considers necessary in the interest of investors and the securitiesG market, or as directed by the CBB.

        • MIE-2.4.2

          The investigation report shall be submitted to the CMSDG .

        • MIE-2.4.3

          The CMSDG may, after considering the investigationG report and the facts and evidence of the case and if satisfied that there is contravention of the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, decide to initiate appropriate enforcement actions. This is without prejudice to the powers of the CBB to take interim and other enforcement actions before conducting formal investigationsG , or before receipt of a final investigationG report.

        • MIE-2.4.4

          Apart from initiating appropriate enforcement actions referred to in paragraph MIE-2.4.3, the CMSDG may make referrals to other regulators and authorities in the Kingdom of Bahrain, as well as to the overseas regulators and authorities, particularly in respect of contraventions which can be addressed by such other domestic or overseas regulators/authorities.

      • MIE-2.5 Judicial Investigation

        • MIE-2.5.1

          Article 115 of the CBB Law states that: "The officers of the Central Bank who are appointed by a resolution issued by the Minister of Justice and Islamic Affairs in agreement with the Governor, shall have the capacity of Judicial Investigation Officers with respect to criminal offences that fall under their jurisdiction and relevant to the duties assigned to them. The verbal process of such crimes prepared by the said officials should be referred to the public prosecution pursuant to a resolution to be issued by the Governor or any personG he may authorise".

        • MIE-2.5.2

          The CBB may suggest The Minister of Justice and Islamic Affairs appoint any of the officers of the CMSDG as Judicial Investigation Officers with respect to criminal offences relating to the securitiesG market or the offences covered by the scope of this Module. Judicial investigation undertaken by the officials of the CMSDG , either jointly with the officers of the Ministry of Justice and Islamic Affairs, or otherwise, shall submit an investigationG report to the CMSDG , giving details of contraventions and offences of the CBB Law, rules and regulations, along with all relevant information and evidence.

        • MIE-2.5.3

          The CMSDG may, after considering the investigationG report submitted to the CMSDG officers who conducting the judicial investigationG , and if satisfied that there is a contravention of the CBB Law, rules and regulations, decide to initiate appropriate enforcement actions.

    • MIE-3 Enforcement

      • MIE-3.1 Enforcement

        • The CBB's General Approach to Enforcement

          • MIE-3.1.1

            This section sets out the CBB's approach to enforcement, and the measures used by the CBB to address failures and contraventions by various market participants, including capital market service providersG , members of SROsG , issuers, or any other personsG involved in the non-compliance or contravention. The purpose of such measures is to encourage high standards of compliance by all those involved in the capital market, thus reducing risk to the Kingdom's financial sector in general, and the capital market in particular.

          • MIE-3.1.2

            Since most of the CBB's enforcement powers are derived from the CBB Law, this Module contains a large number of references to the Law. Users of the Module should therefore refer to the Law as well as to the Module where necessary. In the event of a dispute on interpretation between the Law and the description of an enforcement power in this Module, the provisions of the Law prevail.

          • MIE-3.1.3

            The CBB's effective and proportionate use of its enforcement powers plays an important role in the pursuit of its regulatory objectives of protecting investors, maintaining confidence in the financial system, promoting public awareness and reducing risks and financial crime. For example, using enforcement helps to contribute to the protection of investors and to deter future contraventions of the CBB Law and other application requirements and market abuse. It can also be a particularly effective way, through publication of enforcement outcomes, of raising awareness of regulatory standards.

          • MIE-3.1.4

            There are a number of principles underlying the CBB's approach to the exercise of its enforcement powers:

            (a) The effectiveness of the regulatory regime depends to a significant extent on maintaining an open and cooperative relationship between the CBB and those it regulates.
            (b) The CBB will seek to exercise its enforcement powers in a manner that is transparent, proportionate, responsive to the issue and consistent with its publicly stated policies.
            (c) The CBB will seek to ensure fair treatment when exercising its enforcement powers.
            (d) The CBB will aim to enhance the market discipline of the personG who is the subject of its action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance, and where appropriate, to remedy the harm caused by the non-compliance.
            (e) The CBB will seek to exercise its enforcement powers in a non-discriminatory manner with an effort to treat similarly situated personsG and entities in a similar manner.

          • MIE-3.1.5

            Where a personG has failed to comply with the requirements of the CBB Law, rules and regulations, or other relevant laws, rules and regulations, it may be appropriate to deal with this without the need for formal disciplinary or other enforcement action. The proactive supervision and monitoring of the capital market and an open and cooperative relationship between market participants and their regulators, will in some cases where a contravention has taken place, lead the CBB to decide against taking formal disciplinary action. However, in those cases, the CBB will expect the market participant or relevant personG to act promptly in taking the necessary remedial action agreed with its regulators or SROsG , to deal with the CBB's concerns. If the market participant or relevant personG does not do this, the CBB may take disciplinary or other enforcement action in respect of the original contravention.

          • MIE-3.1.6

            The CBB favours an open, pragmatic and collaborative relationship with market participants, within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements.

          • MIE-3.1.7

            The CBB's approach is not to prescribe in detail the exact regulatory response for each and every contravention, as there may be several types of contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.

          • MIE-3.1.8

            In deciding any given regulatory and enforcement response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the CBB Law and this Module. The CBB's overall approach is to take into account:

            (a) The seriousness of the contravention concerned (including the risks posed to the capital market);
            (b) The compliance track record of the personG concerned (including the extent to which the contravention reflects systemic weaknesses, reckless conduct, or wilful violation); and
            (c) The measures that are most likely to achieve the desired result of remedying the contravention and preventing future contraventions.

          • MIE-3.1.9

            Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account a person'sG compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve an overall consistency in its regulatory actions.

          • MIE-3.1.10

            Underlying the CBB's approach in paragraph MIE-3.1.8 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures — such as initiating prosecution for imposing criminal sanctions, cancellation of license or withdrawal of "fit and proper" status — for the most serious contraventions.

          • MIE-3.1.11

            Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the person concerned, before using one of this Module's enforcement mechanisms. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually move immediately to one or more of the enforcement mechanisms outlined in this Module. In most such cases, though, the CBB also expects to continue an active dialogue with the person concerned, aimed at remedying the contravention.

          • MIE-3.1.12

            Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the person concerned has been given a suitable opportunity to be heard and/or make representations.

        • Senior Management Responsibility

          • MIE-3.1.13

            The CBB is committed to ensuring that senior managers of CBB licensees, listed companies, issuers of securitiesG and other personsG fulfil their responsibilities. The CBB expects senior management to take responsibility for ensuring their organizations identify risks, develop appropriate systems and controls to manage those risks and ensure that the systems and controls are effective in practice. Where senior managers are themselves responsible for misconduct, the CBB will where appropriate, bring cases against individuals as well as organizations. The CBB believes that deterrence will most effectively be achieved by bringing home to such individuals the consequences of their actions.

          • MIE-3.1.14

            The CBB recognises that cases against individuals are very different in their nature from cases against corporate entities and the CBB is mindful that an individual will generally face greater risks from enforcement action in terms of financial implications, reputation and livelihood than would a corporate entity. However, taking action against individuals sends an important message about the CBB's regulatory objectives and priorities and the CBB considers that such cases have important deterrent values. The CBB is therefore committed to pursuing appropriate cases robustly, and will dedicate sufficient resources to them to achieve effective outcomes.

        • Cooperation

          • MIE-3.1.15

            An important consideration before an enforcement investigationG and/or enforcement action is taken forward is the nature of a capital market service provider'sG , or member of an SRO'sG or listed company's, or issuer's or other person'sG overall relationship with the CBB and whether, against that background, the use of enforcement procedures is likely to further the CBB's aims and objectives. So, for any similar set of facts, using enforcement procedures will be less likely if a capital market service providerG , or a member of an SROG , or a listed company or an issuer, or any other personG has built up over time a strong track record of taking its senior management responsibilities seriously and been open and communicative with the CBB.

            In addition, a personG 's conduct in response to the specific issue which has given rise to the question of whether enforcement procedures should be used will also be relevant. In this respect, relevant matters may include whether the personG has self-reported, helped the CBB establish the facts and/or taken remedial action such as addressing any systems and controls issues and compensating any consumers who have lost out. Such matters will not, however, necessarily mean that enforcement procedures will not be used. The CBB has to consider each case on its merits and in the wider regulatory context, and any such steps cannot automatically lead to an enforcement sanction. However, they may in any event be factors which will mitigate the penalty.

          • MIE-3.1.16

            In those cases where enforcement action is not taken and/or a formal investigationG is not commenced, the CBB will expect the capital market service providerG or members of an SROG , or listed company, or issuer or other personG to act promptly to take the necessary remedial action agreed with its regulators to deal with the CBB's concerns. In cases of failure to take prompt remedial action, the CBB may take disciplinary or other enforcement action in respect of the original contravention.

        • Late Reporting or Non-submission of Reports to the CBB

          • MIE-3.1.17

            The CBB attaches considerable importance to the timely submission of reports by capital market service providersG , or members of SROsG , issuers and other market participants. This is because the information contained in such reports is essential to the CBB's assessment of whether a market participant is complying with the requirements and standards of the regulatory system. So in the majority of cases involving non-submission of reports or repeated failure to submit complete reports in time, the CBB considers that it will be appropriate to initiate enforcement actions.

      • MIE-3.2 Interim Measures and Actions

        • MIE-3.2.1

          In order to pursue the CBB's objectives and perform the duties specified by Articles 3 and 4 of the Law, the CBB needs to initiate appropriate enforcement measures swiftly before further damage is done and take remedial actions as early as possible, in order to protect the interest of the investors and the capital market.

        • MIE-3.2.2

          The CBB's enforcement measures are intended to achieve compliance and therefore may, in certain cases, have to be applied in a timely and prompt manner without waiting for the investigationG to be completed. In such cases, pending the receipt of a final investigationG report, the CMSDG will resort to interim enforcement actions in order to restrain future violation and also act as a remedial, so that the past unlawful conduct may be reversed at the earliest.

        • MIE-3.2.3

          Interim enforcement actions may be taken, based on the information/documents/reports available with the CMSDG , analysis and finding of the surveillance function at the CMSDG , interim findings of the investigationG initiated by the CMSDG , and reports from licensed exchanges and the Clearing, Settlement and Central Depository System and the clearing house, or any other appropriate source of documents or information or reports.

        • MIE-3.2.4

          In cases where the CMSDG takes interim measures, usually the CMSDG will provide a post-decisional opportunity of a hearing to the personsG affected by such interim actions within a reasonable period of time, as expeditiously as possible. The CMSDG may, after taking into account the submissions made by the personsG concerned both during the hearing and in writing, modify or reconfirm or cancel or reverse the enforcement action, as may be deemed fit by the CMSD'sG Enforcement Decision Review Committee (EDRC).

        • MIE-3.2.5

          Interim enforcement actions shall be decided by the CMSDG , based on the available information, facts and evidence, including the preliminary investigationG report or interim investigationG report, or any other information, data, report, facts or evidence available to the CMSDG . Interim enforcement actions can also be decided by the Enforcement Decisions CommitteeG (EDCG ) on a reference made to it by the CMSDG .

        • MIE-3.2.6

          Interim enforcement actions shall be applicable without prejudice to any further investigationG and enforcement actions that may be decided by the CMSDG or the Enforcement Decisions CommitteeG (EDCG ).

        • Procedure

          • MIE-3.2.7

            Based on the facts and evidence available, the CMSDG may at its discretion, decide on an interim enforcement action.

          • MIE-3.2.8

            In the course of the formal investigationG , if it appears to the official of the CMSDG conducting the investigationG , or the appointed investigatorG that an interim enforcement action is warranted, he shall submit the facts and evidence of the case to the CMSDG , along with the proposal for interim enforcement action.

          • MIE-3.2.9

            If the CMSDG , during the course of its normal supervisory functions, finds that interim enforcement action is warranted, the CMSDG shall evaluate the information, documents, data and evidence available, and initiate interim enforcement action, as may be deemed fit.

          • MIE-3.2.10

            The CMSDG shall issue the order to all the parties against whom interim enforcement action is taken and other relevant parties involved in the implementation of the order, including capital market service providersG , members of SROsG , licensed exchanges, licensed clearing houses and depositories, listed companies or issuers of securitiesG , or any other relevant parties.

          • MIE-3.2.11

            The CMSDG shall provide a post-decisional opportunity of a hearing to the personsG affected by the interim enforcement action order within a period not exceeding 7 days, unless it has been decided otherwise for reasons to be recorded in such interim enforcement action.

          • MIE-3.2.12

            Any personG who has been affected by interim enforcement actions may make a request for a hearing before the Enforcement Decisions CommitteeG (EDCG ), but such request shall not affect the validity of the interim enforcement action so taken.

          • MIE-3.2.13

            The CMSDG shall fix a date and time, as expeditiously as possible, for an opportunity to be heard before the EDCG .

          • MIE-3.2.14

            A personG to whom an opportunity to be heard is given, or his duly authorised employee or an advocate and solicitor acting on his behalf can avail such opportunity to be heard and make oral submissions and written statement before the EDCG , along with relevant documents in support of the representations made.

          • MIE-3.2.15

            The EDCG may, after taking into account the submissions and written statements made, modify or reconfirm or cancel or reverse the interim enforcement action, as may be deemed fit. The CMSDG shall convey the decision of the EDCG to the personsG who were given an opportunity to be heard.

          • MIE-3.2.16

            The CMSDG shall implement an order issued by the EDCG , as per the terms of the order, with effect from the date specified in the order, or if it is not specified, with immediate effect.

          • MIE-3.2.17

            Interim enforcement actions shall be applicable without prejudice to any further enforcement actions that may be decided by the CMSDG or EDCG , and to any further investigationG and enforcement proceedings and actions.

      • MIE-3.3 Final Enforcement Actions

        • MIE-3.3.1

          When there is clear-cut evidence to confirm contraventions of the CBB Law, CBB Rulebook or other related laws, rules and regulations, the CBB may implement one or more appropriate enforcement measures.

        • MIE-3.3.2

          The CBB may implement one or more appropriate enforcement measures, where the CBB has evidence in the form of findings of the CMSD investigationG done by the investigatorsG appointed by the CBB under Articles 121 or 115 of the CBB Law, along with the information, documents, statements of explanation and other evidence obtained during investigationG and also in the form of findings of the market surveillance function at the CMSDG and when there is clear-cut evidence available, even without a formal investigationG .

        • MIE-3.3.3

          If considered appropriate, the CBB may also rely on the documents and information obtained through other means such as information, reports, documents, statements of explanation obtained from the SROsG , members of SROsG , capital market service providersG , listed companies, issuers of securitiesG and other third parties, as per Articles 111, 112 and 113 of the CBB Law, inspectionG conducted under Article 114 of the CBB Law, and references received from other regulatory authorities with complete evidence etc., to initiate final enforcement actions.

        • MIE-3.3.4

          However, the CBB will usually apply a final enforcement action only after the concerned personG has been given notice of the charges of contravention and an opportunity to make his submissions in writing and/or during a personal hearing.

      • MIE-3.4 Enforcement Proceedings

        • Enforcement Decisions Committee (EDC)

          • MIE-3.4.1

            For the purpose of taking enforcement decisions that are of material significance, the CBB has set up the Enforcement Decisions CommitteeG (EDCG ).

            The EDCG shall be as constituted by a Directive of the Governor.

          • MIE-3.4.2

            The EDCG exercises enforcement powers on behalf of the CBB and is separate from the CBB's executive management structure.

          • MIE-3.4.3

            The EDCG may take the assistance of the CMSDG staff, but they shall be separate from the staff who were involved in conducting the investigationsG and making recommendations to the EDCG . The EDCG may also decide to take the assistance of SROsG and outside experts, if warranted.

        • Scope of Work of the EDC

          • MIE-3.4.4

            The EDCG shall make independent decisions on matters relating to final enforcement actions, or on matters arising out of representations made against interim enforcement actions, or on matters referred to the EDCG by the Governor.

          • MIE-3.4.5

            The scope of work and role of the EDCG is different from the Arbitration Committee or Disciplinary Committee of the SROsG . The EDCG exercises enforcement powers on behalf of the CBB and takes enforcement decisions as per the CBB Law, rules and regulations. The Arbitration Committee of SROsG are responsible for settling all disputes relating to transactions concluded on the SROsG . The Disciplinary Committees of the SROsG are responsible for deciding on violations of business rules of SROsG by the members of the SROsG , listed companies and issuers of securitiesG .

        • The Operation of the EDC

          • EDC Meetings and Composition of Panels

            • MIE-3.4.6

              The EDCG meets as often as necessary to discharge its functions. It may do so, in appropriate cases, in writing or by telephone or email or other electronic means. The EDCG meets in private.

            • MIE-3.4.7

              Each meeting of the EDCG shall have a quorum of 3 members as follows:

              (a) Its Chairman, or vice-chairman in his absence (who will chair the meeting); and
              (b) At least two other members.

              The CMSDG shall maintain the minutes of the meetings and record the proceedings of the EDCG . The minutes of the meetings shall be signed by the Chairman of the EDCG .

        • Conflicts of Interest

          • MIE-3.4.8

            The EDCG will seek not to continue participation of a member to join the panel to consider a matter in which he has a potential conflict of interest.

          • MIE-3.4.9

            (a) If a member of the EDCG has a potential conflict of interest in any matter in which he is asked to participate, he will disclose the conflict to the EDCG Chairman.
            (b) If the Chairman of the EDCG has received a disclosure in accordance with rule (a) and considers it reasonable and appropriate, he will require the member of the EDCG to stand down from consideration of that matter.

          • MIE-3.4.10

            The CMSDG will record and document all disclosures of potential conflicts of interest and the steps taken to manage them.

        • Procedure: General

          • MIE-3.4.11

            The EDCG will follow the procedure described in this Module, but subject to that it will conduct itself in the manner the EDCG Chairman considers suitable, in order to enable the EDCG to determine fairly and expeditiously the matter which it is considering.

          • MIE-3.4.12

            Each member of the EDCG present is entitled to vote on the matter under consideration. The Chairman of the meeting will have a vote as a member of the EDCG and will also have the casting vote in a tie.

          • MIE-3.4.13

            The EDCG Chairman may, acting alone, decide matters relating to the arrangements for an EDCG meeting, including its timing.

          • MIE-3.4.14

            If the EDCG considers it relevant to its consideration, it may ask the CMSDG staff to explain or provide any or all of the following:

            (a) Additional information about the matter (which CMSDG staff may seek by further investigationG ); or
            (b) Further explanation of any aspect of the CMSDG staff recommendation or accompanying papers; or
            (c) Information about CBB priorities and policies (including as to the CBB's view on the law or on the correct legal interpretation of provisions of the CBB Law, rules and regulations).

        • Procedure: Warning Notices

          • MIE-3.4.15

            If the CMSDG considers that action is appropriate, in a matter for which the EDCG is the decision-maker, and that a warning noticeG should be given, a reference shall be made to the EDCG .

          • MIE-3.4.16

            If the EDCG decides that the CMSDG should give a warning noticeG :

            (a) The EDCG will settle the wording of the warning noticeG and will ensure that the notice complies with the relevant provisions of the CBB Law, rules and regulations;
            (b) The EDCG will make any associated decisions;
            (c) The CMSDG staff will make appropriate arrangements for the notice to be given; and
            (d) The CMSDG staff will make appropriate arrangements for the disclosure of the substantive communications between the EDCG and the CMSDG staff who made the recommendation, and on which the EDCG 's decision is based. This may include providing copies in electronic format.

            Warning noticesG shall be sent by registered mail.

          • MIE-3.4.17

            A warning noticeG shall be accompanied by the following:

            (a) The CMSD'sG or the investigatorG 's findings and conclusions that lead to the warning noticeG ;
            (b) Relevant extracts from the investigationG report, if there is one;
            (c) Documents and evidence submitted to the EDCG based on which the decision was made by the EDCG ;
            (d) The alleged contraventions of the CBB Law, rules and regulations, or other applicable laws, rules and regulations.

        • Procedure: Representations

          • MIE-3.4.18

            (a) A warning noticeG will specify the time allowed for making representations. This will not be less than 15 days.
            (b) The CMSDG will also, when giving a warning noticeG , specify a time within which the recipient is required to indicate whether he wishes to make oral representations.

          • MIE-3.4.19

            (a) The recipient of a warning noticeG may request an extension of the time allowed for another 15 days (i.e. for a maximum period of 30 days from the date of the warning noticeG ) for making representations. Such a request must normally be made within 14 days of the notice being given.
            (b) If a request is made, the Chairman of the EDCG will decide whether to allow an extension and if so, how much additional time is to be allowed for making representations. In reaching his decision he may take account of any relevant comments from the CMSDG staff responsible for the matter.
            (c) The CMSDG will notify the relevant party and the CMSDG staff responsible for the matter of the decision in writing.

          • MIE-3.4.20

            (a) If the recipient of a warning noticeG indicates that he wishes to make oral representations, the CMSDG staff in conjunction with the Chairman of the EDCG will fix a date or dates for a meeting at which the relevant EDCG members will receive those representations.
            (b) In making those arrangements, the CMSDG staff will draw the Chairman's attention to any particular issues about the timing of the meeting which have been raised by the recipient of the notice or the relevant CBB staff.

          • MIE-3.4.21

            The Chairman of the relevant meeting will ensure that the meeting is conducted so as to enable:

            (a) The recipient of the warning noticeG to make representation;
            (b) The relevant CMSDG staff to respond to those representations;
            (c) The EDCG members to raise with those present any points or questions about the matter (whether in response to particular representations or more generally about the matter); and
            (d) The recipient of the notice to respond to points made by CMSDG staff or the EDCG ;

            but the Chairman may ask the recipient of the notice or CMSDG staff to limit their representations or response in length, or to particular issues arising from the warning noticeG .

          • MIE-3.4.22

            The recipient of the warning noticeG may wish to be legally represented at the meeting, but this is not a requirement.

          • MIE-3.4.23

            In appropriate cases, the Chairman of a meeting for oral representations may ask those present to provide additional information in writing after the meeting. If he does so, he will specify the time within which that information is to be provided.

          • MIE-3.4.24

            The EDCG will not, after the CMSDG has given a warning noticeG , meet with or discuss the matter whilst it is still ongoing with the CMSDG staff responsible for the case, without other relevant parties being present or otherwise having the opportunity to respond.

        • Procedure: Enforcement orders

          • MIE-3.4.25

            If no representations are made in response to the warning noticeG , the CMSDG will regard as undisputed the allegations or matters set out in the notice and the default procedure will apply.

        • Default Procedures

          • MIE-3.4.26

            If the CMSDG receives no response or representations within the period specified in a warning noticeG , the EDCG may regard as undisputed the allegations or matters in that notice and an enforcement orderG will be given accordingly.

          • MIE-3.4.27

            If the CMSDG receives no response or representations within the period specified in a warning noticeG , the CMSDG will not give a second warning noticeG . The outcome depends on when the relevant action took or takes effect (as stated in the notice). If the action:

            (a) Took effect immediately or on a specified date which has already passed, it continues to have effect; or
            (b) Was to take effect on a specified date which is still in the future, it takes effect on that date; or
            (c) Was to take effect when the matter was no longer open for review, it takes effect when the period to make representations expires.

          • MIE-3.4.28

            A personG who has received an enforcement orderG and has not previously made any response or representations to the EDCG , may nevertheless refer the EDCG 's decision to the Enforcement Decisions Review Committee (EDRC).

          • MIE-3.4.29

            In exceptional cases, the EDRC may permit representations from a personG who has received an enforcement orderG (or a second warning noticeG ) or against whom action, detailed in a first warning noticeG , has taken effect, and shows on reasonable grounds that he did not receive the warning noticeG , or that he had reasonable grounds for not responding within the specified period. In these circumstances, the EDRC may decide to give a further warning noticeG or enforcement orderG .

          • MIE-3.4.30

            If representations are made, the EDCG will consider whether it is right in all the circumstances to give an enforcement orderG , then the EDCG will:

            (a) Review the material before it;
            (b) Consider any representations made (whether written, oral or both) and any comments by CMSDG staff or others in respect of those representations;
            (c) Decide whether to give the notice, and the terms of any notice given.

          • MIE-3.4.31

            If the EDCG decides that the CMSDG should give an enforcement orderG :

            (a) The EDCG will settle the wording of the order which will include a brief summary of the key representations made and how they have been dealt with, and will ensure that the order complies with the relevant provisions of the CBB Law, rules and regulations. The enforcement orderG shall contain:
            (i) The nature of the offence;
            (ii) The representations made before the EDCG ;
            (iii) The decision by the EDCG ;
            (iv) The penalty or other enforcement action;
            (v) EDCG 's recommendation if a criminal prosecution shall be launched.
            (b) The EDCG will make any relevant statutory notice associated decisions, including whether the CMSDG is required to give a copy of the order to a third party;
            (c) The EDCG will decide the manner of publication and circulation of the enforcement action;
            (d) The CMSDG staff will make appropriate arrangements for the order to be issued for the implementation of the decisions of the EDCG contained in the enforcement orderG ;
            (e) The enforcement orderG shall be sent to the recipients by registered mail; and
            (f) The enforcement orderG or decisions shall not be issued during the market hours of the licensed exchanges.

          • MIE-3.4.32

            If the EDCG decides that the CMSDG should not give an enforcement orderG , the CMSDG staff will notify the relevant parties (including the relevant CMSDG staff) in writing of that decision.

          • MIE-3.4.33

            CMSDG staff responsible for recommending action to the EDCG will continue to assess the appropriateness of the proposed action in the light of new information or representations they receive and any material change in the facts or circumstances relating to a particular matter. It may be therefore that CMSDG may decide to advise the EDCG to consider whether or not to give a notice of discontinuance to a personG to whom a warning noticeG or enforcement orderG has been given.

        • Court Proceedings

          • MIE-3.4.34

            A decision by the EDCG to give an enforcement orderG may lead to a reference to the Public Prosecutor's office and to the Court. The conduct of proceedings before the Court is not however a matter for the EDCG .

        • Review Proceedings

          • MIE-3.4.35

            Where an enforcement orderG is issued by the EDCG , a party may appeal such decision to the Enforcement Decisions Review Committee (EDRC).

          • MIE-3.4.36

            The EDRC shall be as constituted by a Directive of the Governor.

          • MIE-3.4.37

            The EDRC shall be operated on the same basis as the EDCG , with the exception that a new panel shall be appointed which may include the Governor as Chairman of the EDRC.

          • MIE-3.4.38

            The scope of the EDRC shall be limited to determining:

            (a) Whether the EDCG followed the correct procedures of the EDCG ;
            (b) Whether the penalty imposed by the EDCG is justified.

      • MIE-3.5 Settlement

        • Introduction

          • MIE-3.5.1

            (a) A personG subject to enforcement action may agree to a financial penalty or other outcome, rather than contest formal action by the CBB.
            (b) The fact that he does so will not usually obviate the need for an enforcement orderG recording the CBB's decision to take that action. Where, however, the personG subject to enforcement action agrees not to contest the content of a proposed enforcement orderG , the decision to issue that order will be taken by the EDCG on matters which are before the EDCG , or by the CMSDG on matters which have not been referred to or being considered by the EDCG .

        • Procedure: General

          • MIE-3.5.2

            A personG who is or may be subject to enforcement action may wish to discuss the proposed action with the CMSDG through settlement discussions. The CMSDG shall refer the matter to the EDCG if the matter is subject to proceedings before the EDCG and decide on its own on other matters.

          • MIE-3.5.3

            Settlement discussions may take place at any time during the enforcement process if both parties agree. This might be before the giving of a warning noticeG , before an enforcement orderG , or even after referral of the matter to the Court. But the CMSDG would not normally agree to detailed settlement discussions until it has a sufficient understanding of the nature and gravity of the suspected misconduct or issue to make a reasonable assessment of the appropriate outcome. Settlement after an enforcement orderG is not encouraged.

          • MIE-3.5.4

            The CMSDG and the personG concerned may agree that neither the CMSDG nor the personG concerned would seek to rely against the other on any admissions or statements made in the course of their settlement discussions, if the matter is considered subsequently by the EDCG or the Court.

        • Procedure: Participation of Decision-Makers in Discussions

          • MIE-3.5.5

            (a) The EDCG may, but need not, participate in the discussions exploring possible settlement.
            (b) If the EDCG has not been involved in the discussions, but an agreement has been reached, they may ask to meet the relevant CMSDG staff or the personG concerned, in order to assist in the consideration of the proposed settlement.

          • MIE-3.5.6

            The terms of any proposed settlement:

            (a) Will be put in writing and be agreed by CMSDG staff and the personG concerned;
            (b) May refer to a draft of the proposed warning noticesG (if any) setting out the facts of the matter and the CMSD'sG conclusions;
            (c) May, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by the personG concerned to:
            (i) Waive and not exercise any rights under the CBB Law to notice of, or access to material relied upon by the CMSDG any secondary material which might undermine the CMSDG decision to give the warning noticeG ;
            (ii) Waive and not exercise any rights under the CBB Law or otherwise to make representations to the EDCG in respect of a warning noticeG ;
            (iii) Not object to the giving of an enforcement orderG before the expiry of the 30 day period after the giving of a warningG noticeG ;
            (iv) Not dispute with the CMSDG the facts and matters set out in a warning noticeG , or enforcement orderG , and to waive and not exercise any right under the CBB Law to refer the matter to the Court.

          • MIE-3.5.7

            The EDCG may:

            (a) Accept the proposed settlement by deciding to give an enforcement orderG based on the terms of the settlement; or
            (b) Decline the proposed settlement;

            Whether or not the EDCG have met with the relevant CMSDG staff or the personG concerned.

          • MIE-3.5.8

            (a) Where the EDCG declines to issue an enforcement orderG despite the proposed settlement, they may invite CMSDG staff and the personG concerned to enter into further discussions to try to achieve an outcome the EDCG would be prepared to endorse.
            (b) However, if the proposed action by the CMSDG has been submitted to the EDCG for consideration, it will be for the EDCG to decide:
            (i) Whether to extend the period for representations in response to a warning noticeG ; or
            (ii) If representations have been made in response to a warning noticeG , whether to proceed to give an enforcement orderG .

          • MIE-3.5.9

            The CMSDG and other parties may agree to mediation as a way of facilitating settlement in appropriate cases.

      • MIE-3.6 Enforcement Measures and Actions

        • MIE-3.6.1

          As it is neither practical nor effective to prescribe in detail the exact enforcement measures for each and every type of potential non-compliance or violation, the CBB will consistently apply the principles stated in paragraph MIE-3.1.4 to assess the individual circumstance of each contravention and decide on the appropriate type or types of enforcement actions that may be resorted to in respect of each case.

        • MIE-3.6.2

          The type of enforcement actions, both interim and final, that can be applied on different categories of personsG involved could include but not be limited to the enforcement actions and measures specified in paragraphs MIE-3.6.3 to MIE-3.6.9.

        • Capital Market Service Providers and Members of SROs

          • MIE-3.6.3

            Enforcement actions in respect of the capital market service providersG and members of SROsG will mainly be governed by the CBB Law and the relevant volume of the CBB Rulebook and enforcement actions thereunder include:

            1) Formal warnings;
            2) Directions as per Article 38 of the CBB Law;
            3) Financial penalties as per Article 129 of the CBB Law;
            4) Placing a licensee under administration as per Article 136 of the CBB Law;
            5) Cancellation or amendment of license as per Article 48 of the CBB Law;
            6) Cancellation of 'fit and proper' approval under Article 65 of the CBB Law;
            7) Criminal sanctions under Articles 163, 169, 170 and 171 of the CBB Law.

            In addition to the above, the CBB may also resort to the following enforcement actions under the CBB Law:

            (a) Directives under Article 38
            i. Cease and Desist Order

            An order prohibiting capital market service providersG and members of SROsG from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the final investigationG and/or enforcement proceedings as a permanent injunction.
            ii. Freezing Accounts

            An order restricting a securitiesG or securitiesG cash account of a capital market service providerG and member of an SROG with the licensed exchanges, clearing houses, central depositories, banks, brokerage firms, etc. This measure generally will be used as an interim measure.
            iii. Specific Directives

            An order requiring a capital market service providerG and member of an SROG to implement specific measures or checks and balances, to ensure implementation of the CBB Law, rules and regulations.
            iv. Private Warnings

            In certain cases despite concerns about a personG 's conduct or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make the personG aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where the personG has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to lead to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.
            (b) Amendment or Revocation of License Under Article 48(e)

            The CBB may amend or revoke a license of a capital market service providerG , or member of an SROG for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.
            (c) Imposing Restrictions under Article 128

            The CBB may impose administrative restrictions upon capital market service providersG , or members of SROsG , in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.
            (d) Imposing Financial Penalties under Article 129 of the CBB Law

            The CBB may impose financial penalties as an enforcement action for contravention of the CBB Law, rules and regulations and the terms and conditions of a license.
            (e) Appointing an Observer Member on the Board of the Licensee under Article 130

            If imposing administrative restrictions prove to be futile, then the CBB may appoint an observer member on the Board of Directors of the capital market service providerG , or member of an SROG , for a specified period.
            (f) Suspension of a Licensee under Article 131

            The CBB may suspend a capital market service providerG , or member of an SROG , who contravenes the provisions of the CBB Law, rules and regulations and terms and conditions of a license for a period not exceeding 12 months.
            (g) Public Censure under Article 132

            The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.
            (h) Criminal Sanction under Article 166

            The CBB may initiate proceedings for imposing criminal sanctions in respect of offences which result in the violation of Articles 81 or 85 of the CBB Law, if capital market service providersG , or members of SROsG , are involved in such violations.
            (i) Criminal Sanction under Article 167

            The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.
            (j) Criminal Sanction under Article 168

            Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a personG who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."
            (k) Criminal Sanction under Article 169

            Article 169 of the CBB Law states that "Without prejudice to any greater penalty stated under the Penal Code or any other law, a punishment by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, shall be imposed upon any official or employee of the licensee who acts or permitted an action in violation of Article (134) of this Decree, if he knows or should have known that the licensee is insolvent".
            (l) Criminal Sanction under Article 170

            Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law: (1) A personG shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a current investigationG or an investigationG likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any personG participates in such an offence shall be liable to the same penalty of the principal offender. (2) A personG shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed any investigation carried out by the Central Bank or an investigatorG appointed by the Central Bank."
            (m) Criminal Sanction under Article 171

            Article 171 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a personG who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8), shall be liable to imprisonment and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty." This criminal sanction is applicable to capital market service providersG , or members of SROsG who violate Part 8 of the CBB Law.
            (n) Criminal Sanction under Article 172

            Article 172 of the CBB Law states that "Any legal personG shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legal personG or any personG who acts in such capacity."
            (o) Criminal Sanction under Article 163

            Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or any personG appointed by the Central Bank to conduct an investigationG or inspectionG on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."
            (p) Criminal Sanction under Article 169

            Article 169 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a punishment by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, shall be imposed upon any official or employee of the licensee who acts or permitted an action in violation of Article (134) of this Decree, if he knows or should have known that the licensee is insolvent."

        • Disciplinary Action through Licensed Exchanges and Licensed Clearing Houses/Central Depositories (SROs)

          • MIE-3.6.4

            SROsG are required to establish a Disciplinary Committee for the purpose of deciding violations by the members or listed companies, or issuers of SRO'sG business rules. A Disciplinary Committee shall decide on cases relating to any violation of laws, rules and regulations which regulate the licensed exchanges. Enforcement measures that can be imposed on members of SROsG and listed companies/issuers through the Disciplinary Committee of licensed exchanges may include:

            i. Warning;
            ii. Confiscation of all or part of the member's deposits with the licensed exchange;
            iii. Suspension of trading or clearing rights;
            iv. Suspension of membership rights;
            v. Cancellation of membership;
            vi. Financial penalties, fines and charges.

            The CMSDG may advise licensed exchanges, licensed clearing houses and central depositories within their scope of their respective powers, to take appropriate enforcement actions. These actions can be in addition to other enforcement actions which are taken by the CBB itself.

        • Listed Companies

          • MIE-3.6.5

            Listed companies are required to meet their obligations as per the CBB Law, rules and regulations and these obligations include the dissemination of information, filing of returns, notifications and periodic reports. For example, listed companies are required to monitor insiders' transactions and report to the CMSDG regarding any suspected case of abuse of inside information and file reports regarding insiders' transactions. If a listed company or an issuer fails to comply with or contravenes the CBB Law, rules and regulations, or any other applicable laws, rules and regulations, the CBB may initiate appropriate enforcement actions. Such enforcement actions may include, but not be limited to:

            (a) Directives under Article 38:
            i. Formal warning:

            An order issuing a formal warning may be issued to a listed company in order to clearly set out the CBB's concerns to a listed company to ensure that the matter is viewed by the recipient with appropriate seriousness.
            ii. Cease and Desist Order:

            An order prohibiting a listed company from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the final investigationG and/or enforcement proceedings as a permanent injunction.
            iii. Specific Directives:

            An order requiring a listed company to implement specific measures or checks and balances, to ensure implementation of the CBB Law, rules and regulations.
            iv. Private Warnings

            In certain cases despite concerns about a personG 's behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make the personG aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where the personG has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to head to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.
            (b) Restraining offering of securities using powers under Article 81:

            The CBB may by an order under Article 38 read with Article 81 direct a listed company or any other prospective issuer not to access the market for an offer or issue of securitiesG in the Kingdom for a certain period or until certain conditions are satisfied.
            (c) Cancellation of listing and suspension of trading:

            Article 87 (a) of the CBB Law states that: "The Central Bank may decide to cancel the listing of any securitiesG that contravene the requirements of the Listing Rules, or to suspend the trading of any listed securitiesG facing exceptional circumstances that the Central Bank considers as sufficient grounds for the suspension of the securitiesG .

            The cancellation of listing or the suspension of trading shall be decided by the Governor."
            (d) Imposing restrictions under Article 128

            The CBB may impose administrative restrictions upon listed companies in order to secure the compliance with the CBB Law, rules and regulations and the terms and conditions of a license.
            (e) Public censure under Article 132

            The CBB may issue a public statement on breach of the provision of the CBB Law, rules and regulations and terms and conditions of a license.
            (f) Criminal sanction under Article 163

            Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or any personG appointed by the Central Bank to conduct an investigationG or inspectionG on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."
            (g) Criminal Sanction under Article 166

            The CBB may initiate proceedings for imposing criminal sanctions in respect of violation of Articles 81 or 85 of the CBB Law.
            (h) Criminal Sanction under Article 167

            The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.
            (i) Criminal Sanction under Article 168

            Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a personG who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."
            (j) Criminal Sanction under Article 170

            Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law:
            (1) A personG shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a current investigationG or an investigationG likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any personG participates in such an offence shall be liable to the same penalty of the principal offender.
            (2) A personG shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed any investigationG carried out by the Central Bank or an investigatorG appointed by the Central Bank."
            (k) Criminal Sanction under Article 172

            Article 172 of the CBB Law states that "Any legal personG shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legal personG or any personG who acts in such capacity."

        • Licensed Exchanges, Clearing Houses and Central Depositories

          • MIE-3.6.6

            As an SROG , the licensed exchanges, clearing houses and depositories are required to:

            a) Actively perform market surveillance as a front-line regulator;
            b) Take disciplinary action for contraventions by members and listed companies/issuers through the SRO'sG Disciplinary Action Committee;
            c) Identify potential cases of unlawful transactions and take preventative actions;
            d) Report suspected cases of market abuse and manipulation to the CBB;
            e) Implement enforcement actions determined by the CBB.

            When an SROG contravenes the provisions of the CBB Law, rules and regulations, as CBB licensees, the enforcement action applicable to all other capital market service providersG of the CBB will also be applicable to the licensed exchanges, clearing houses and central depositories. In addition to these enforcement actions, these market infrastructure institutions will be subject to other enforcement actions stated in the Markets & Exchanges Module and the Clearing, Settlement & Central Depository Module. Such enforcement measures include:

            a) Cancellation or amendment of license;
            b) Directives under emergency situations;
            c) Removal of officers from his office or employment.

        • Users of SROs, Capital Market Service Providers and Members of SROs and Persons other than Licensees and Listed Companies

          • MIE-3.6.7

            (a) Directives under Article 38

            Article 38 of the CBB Law states
            "(a) The Governor shall issue the necessary directives to ensure the implementation of this Law, any regulations issued in accordance to this Law and the achievement of the objectives of the Central Bank. Such directives shall be legally supported and the intended addressees shall be identified.
            (b) The Governor may issue directives that aim to facilitate the understanding and implementation of this law and any regulations thereof. He may also issue directives regarding other matters, as he deems appropriate to serve the objectives of the Central Bank.
            (c) The directives shall be circulated through the means approved by the Governor. Once circulated to the intended addressees, the directives become binding."
            Directives under Article 38 of the CBB Law may also be issued against personsG other than licensees and listed companies as an enforcement measure to ensure compliance with the CBB Law, rules and regulations. Such directives may include:
            i. Formal warning:

            An order issuing a formal warning may be issued to relevant personsG in order to clearly set out the CBB's concerns to such personsG to ensure that the matter is viewed by the recipient with appropriate seriousness.
            ii. Cease and Desist Order:

            An order prohibiting a relevant personG from continuing an activity. Cease and desist orders can be used as an emergency measure to prevent possible or potential irreparable harm as an interim and temporary injunction, or it can also be used as the outcome of the final investigationG and/or enforcement proceedings as a permanent injunction.
            iii. Freezing Accounts:

            An order freezing an account of a relevant personG with the financial institutions including licensed exchanges, clearing houses, central depositories, banks, brokerage firms, etc. This measure generally will be used as an interim measure.
            iv. Specific Directives:

            An order requiring a relevant personG to implement specific measures or checks and balances to ensure implementation of the CBB Law, rules and regulations.
            v. Imposing Restrictions:

            An order imposing restrictions on a relevant personG as an enforcement measure to ensure compliance with the CBB Law, rules and regulations.
            iv. Private Warnings

            In certain cases despite concerns about a personG 's behaviour or evidence of a breach, the CBB may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal action for a financial penalty or public censure. This is consistent with the CBB's risk-based approach to enforcement. In such cases, the CBB may give a private warning to make the personG aware that they came close to being subject to formal action. Typically, the CBB might give a private warning rather than take formal action where the matter giving cause for concern is minor in nature or degree, or where the personG has taken full and immediate remedial action. But there can be no exhaustive list of the conduct or the circumstances which are likely to head to a private warning rather than more serious action. The CBB will take into account all the circumstances of the case before deciding whether a private warning is appropriate.
            (b) Criminal Sanction under Article 166

            The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Articles 81 or 85 of the CBB Law.
            (c) Criminal Sanction under Article 167

            The CBB may initiate proceedings for imposing criminal sanctions in respect of market manipulation offences which result in the violation of Article 100 of the CBB Law; i.e. abuse of inside information.
            (d) Criminal Sanction under Article 168

            Article 168 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a personG who contravenes Article (106) of this law is guilty of an offence of market manipulation and shall be liable to imprisonment for a term not exceeding six months and a fine not exceeding Bahraini Dinars ten thousand (10,000) or either penalty."
            (e) Criminal Sanction under Article 170

            Article 170 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law: (1) A personG shall be liable to imprisonment for a term not exceeding five years and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or he should know that such document is relevant or shall be of relevance to a current investigationG or an investigationG likely to be conducted in accordance with Chapter (1) of Part 9 of this Law. Any personG participates in such an offence shall be liable to the same penalty of the principal offender. (2) A personG shall be liable to imprisonment for a term not exceeding three months, or a fine not exceeding three thousand (3,000) Bahraini Dinars, or either penalty, if he intentionally obstructed any investigationG carried out by the Central Bank or an investigatorG appointed by the Central Bank."
            (f) Criminal Sanction under Article 171

            Article 171 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a personG who discloses in bad faith any Confidential Information in contravention of the provisions of Part (8), shall be liable to imprisonment and a fine not exceeding Bahraini Dinars ten thousand (10,000), or either penalty."
            (g) Criminal Sanction under Article 172

            Article 172 of the CBB Law states that "Any legal personG shall be liable and punished under criminal law by a fine not exceeding two hundred thousand Bahraini Dinars, if any of the crimes stated in this Decree are committed in the name or for his account or by means of any of his facilities, and this was a result of any action or gross negligence or by the approval or under covering of any member of the board of directors or any other official of that legal personG or any personG who acts in such capacity."
            (h) Criminal Sanction under Article 163

            Article 163 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, any officer or employee of a licensee or a listed company shall be punished by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, if he: (1) Concealed any records, information or documents relevant to the activities of the licensee, requested by the Central Bank or any personG appointed by the Central Bank to conduct an investigationG or inspectionG on the business of the licensee or the listed company, or provides any of them, in a bad faith, with statements or information which proves to be false or misleading or do not reflect the actual financial position of the licensee or the listed company. (2) Concealed from the external auditor any records, information or documents necessary for auditing the accounts of the licensee or the listed company, or provides him in a bad faith, with misleading or inaccurate statements or information which do not reflect the actual financial position of the licensee or the listed company."
            (i) Criminal Sanction under Article 169

            Article 169 of the CBB Law states that "Without prejudice to any greater penalty prescribed under the Penal Code or any other law, a punishment by imprisonment and a fine not exceeding twenty thousand (20,000) Bahraini Dinars, or by either penalty, shall be imposed upon any official or employee of the licensee who acts or permitted an action in violation of Article (134) of this Decree, if he knows or should have known that the licensee is insolvent."

        • Restriction of Capital Market Service Providers, Auditors and Other Experts

          • MIE-3.6.8

            The CBB may in respect of auditors of CBB licensees, listed companies, issuers of securitiesG or any other market participant, restrict the duties of such auditors and other experts, where the auditors and other experts failed to perform their duties specified under the CBB Law, rules and regulations. Any decision of the CBB in this regard may apply for a specified period or indefinite period until the CBB is satisfied that the personG will in future comply with the duties and responsibilities in question.

          • MIE-3.6.9

            The CBB may also restrict the activities that may be undertaken by capitalG market service providersG , lead managers, share registrars, underwriters and other professionals involved in capital market activities.

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